Taxation  of  Land  Values  in 
American  Cities 


The  Next  Step  in  Exterminating 
Poverty 


BY 

BENJAMIN  C.  MARSH 

Author  of   "An   Introduction  to  City  Planning" 

Formerly  Special  Agent  of  the  Philadelphia  Society  for  Organizing  Charity 
Secretary  of  the  Pennsylvania  Society  to  Protect  Children  from  Cruelty 
The  New  York  City  Commission  on  Congestion  of  Population,  and 
The  New  York  State  Commission  on  Distribution  of  Population 


Copyright,  1911,  by  BENJAMIN  C.  MARSH 
920  Broadway,  New  York  City 


DEDICATION. 

To  the  uncounted  millions  of  workers  in  the  only  unpaid  occu- 
pation in  American  cities, — those  who  toil  from  birth  till  death  at 
their  profitless  task  of  creating  land  values  for  landowners, — in  the 
sincere  confidence  that  those  who  have  votes  will  use  the  ballot  and 
those  who  have  influence  will  exert  it,  in  terminating  the  existing 
land  slavery  in  every  American  city. 

The  overthrow  of  the  present  system  of  subjecting  women  and 
children  who  have  no  vote,  and  the  sick  and  the  helpless  to  the  cu- 
pidity of  landowners  involves  a  bitter  struggle.  The  only  other 
struggles  in  our  nation's  history  comparable  with  this  one  to  restore 
to  "freemen"  the  right  to  values  they  produce,  were  the  Revolution- 
ary War,  and  the  War  of  the  Rebellion.  Those  two  wars  involved 
bloodshed  and  loss  of  life,  this  battle  for  economic  freedom  involves 
political, — not  party, — action,  bringing  to  the  attention  of  all  legis- 
lators the  rights  of  all  the  people,  and  not  only  of  the  propertied 
classes  who  have  hitherto  largely  controlled  legislation  for  their 
own  selfish  interests.  While  other  measures  in  the  warfare  to  ex- 
terminate poverty  are  necessary,  that  fight  cannot  be  won,  till  the 
unpaid  creators  of  land  values  secure  through  taxation  of  land  val- 
ues that  which  they  create. 


342172 


INTRODUCTION. 

The  excuse  for  another  book  on  the  taxation  of  land  values  is 
the  failure  adequately  to  tax  land  values,  and  the  increasing  budgets 
of  cities,  counties,  states  and  the  Federal  government,  while  simulta- 
neously, these  political  units  are  piling  up  millions  of  bonded  indebt- 
edness. The  discussion  in  the  present  book,  is  limited  to  the  taxa- 
tion of  land  values  in  cities  for  municipal  purposes  since  here  the 
necessity  of  heavy  taxation  of  land  values  is  of  most  immediate  im- 
portancev  That  similar  taxation  of  land  values  is  necessary  for 
rural  and  agricultural  lands,  and  especially  to  reach  the  unearned 
gains  and  values  of  mineral  and  oil  lands  the  writer  thoroughly 
believes.  The  increase  in  value  of  agricultural  land  from  1900  to 
1910  amounting  to  $15,000,000,000  or  118  per  cent  was  not  wholly 
earned  by  the  owners. 

The  heavy  taxation  of  land  values  in  cities  so  as  to  reduce  the 
ground  rent  to  a  minimum  is  a  complex  question  and  has  manifold 
bearings.  For  this  reason,  even  at  the  risk  of  apparent  repetitions, 
the  subject  is  treated  from  several  points  of  view,  the  relation  to  the 
housing  problem, — of  fundamental  importance  in  every  city, — fiscal 
advantages,  economic  advantages,  and  social  advantages,  while  the 
evil  results  of  present  exemption  of  land  values  from  adequate  taxa- 
tion are  shown  in  a  separate  chapter.  A  brief  statement  of  sources 
of  municipal  revenue  in  foreign  cities  is  incorporated  because  land- 
owners in  American  cities  are  trying  to  discover  or  invent  any  kind 
of  tax  which  can  be  shifted  to  those  least  able  to  bear  it,  to  enable 
them  to  continue  their  ill-gotten,  because  unearned,  gains  through 
increases  of  land  values.  In  the  chapter  on  possible  methods  of 
taxing  land  values  in  American  cities  the  most  important  methods 
are  considered.  The  conclusion  that  a  higher  annual  tax-rate  on 
land  values  and  a  small  land  increment  tax  are  the  most  feasible 
methods  of  reducing  ground  rents  and  securing  an  adequate  revenue 
for  municipal  purposes^ — including  the  cost  of  many  current  and 
recurring  improvements  now  met  by  postponed  payments  with  the 
large  tribute  of  interest  incident  thereto, — will  probably  be  generally 
accepted. 

The  small  number  of  cities  separating  land  and  improvement 
values  has  made  statistical  demonstration  of  the  adequacy  of  the 
taxation  of  land  values  for  municipal  purposes  impossible  for  many 


cities.  A  few  important  cities  only  have  been  selected,  and  the  data 
from  others  not  incorporated  in  the  chapter  on  "Fiscal  Reasons  for 
Heavier  Taxation  of  Land  Values,"  and  general  information,  will 
convince  every  one  that  this  is  an  adequate  source  of  revenue,  nor 
is  this  contention  denied  by  landowners.  Their  sole  contention  is 
that  they  don't  wish  to  have  their  own  profits  reduced.  The  justice 
and  necessity  of  reducing  their  profits  is  thoroughly  demonstrated 
throughout  this  book. 


VI 


FOREWORD 

The  following  editorial  by  Dr.  E.  T.  Devine  on  the  bills  gradually 
to  reduce  the  tax-rate  on  buildings  and  personal  property  in  New 
York,  until  it  is  one-half  the  tax-rate  on  land  and  to  restrict  the 
heights  of  tenements  in  the  city,  was  printed  under  EDITORIAL 
Grist  in  the  SURVEY  for  the  week  of  June  loth,  1911.  It  is  re- 
produced with  Dr.  Devine's  permission,  but  does  not  commit  him 
to  endorsement  of  the  thesis  of  this  book. 

THE  CONGESTION  BILLS 
EDWARD  T.  DEVINE 

Senator  Sullivan  has  introduced  into  the  New  York  Legislature 
the  bills  recommended  by  the  New  York  City  Congestion  Com- 
mission, the  effect  of  which  would  be  to  reduce  relatively  the  rate 
of  taxation  on  improvements  as  compared  with  land. 

The  change  is  one  which  would  have  far  reaching  beneficent 
results.  It  would  force  unoccupied  land  into  use,  increase  the 
supply  of  new  tenements,  and  so  reduce  rents.  Yet  it  would  do 
this  by  favoring  builders  and  owners  of  tenements  rather  than  by 
putting  new  and  additional  burdens  upon  them.  Of  course  so 
far  as  it  encouraged  new  buildings  it  would  diminish  the  monopoly 
advantage  of  present  owners  and  builders,  and  from  the  point  of 
view  of  the  public  interest  this  is  exceedingly  desirable.  With 
the  pressure  of  population  in  New  York  there  is  no  difficulty 
about  filling  any  tenements  or  apartments  of  any  class  if  the  rents 
are  reasonable,  and  by  reducing  the  relative  taxation  on  buildings 
both  old  and  new  we  increase  the  chances  of  reasonable  rents. 

Another  good  effect  of  the  change  would  be  to  encourage  the 
building  of  factories  on  land  now  unoccupied.  While  I  am  not 
in  favor  of  allowing  more  factories  to  be  built  in  the  congested 
quarters  of  Manhattan  Island,  there  are  abundant  suitable  factory 
sites  within  the  limits  of  Greater  New  York  which  it  would  be 
advantageous  to  have  used  in  this  way.  If  our  population  and 
factories  were  properly  distributed  there  would  be  no  ground  for 
complaint  as  to  congestion.  Increasing  the  relative  taxation  on 
unoccupied  land,  and  diminishing  the  tax  upon  buildings  and  im- 
provements tend  to  bring  about  this  distribution. 

If  so  great  a  change  as  halving  the  rate  of  taxation  on  buildings 
were  made  suddenly  it  would  involve  an  element  of  injustice, 


vn 


but  to  distribute  this  change  over  a  period  of  five  years  reduces 
that  element  to  the  minimum  consistent  with  making  any  desirable 
change  whatever.  If,  again,  there  were  no  restrictions  on  heights  of 
buildings,  fireproofing,  etc.,  the  proposed  change  might  increase 
congestion  on  Manhattan  Island  by  encouraging  owners  of  low 
buildings  to  build  higher,  and  the  owners  of  unoccupied  lots  to 
invest  all  the  money  they  can  raise  in  building  skyscrapers  and  six- 
story  tenements;  but  there  are  already  many  restrictions,  and  it 
is  proposed  by  another  pending  bill  to  introduce  still  others  limiting 
future  tenements  north  of  iSist  street  to  four  stories.  It  is  better 
that  any  unoccupied  lots  on  Manhattan  Island  should  be  built  upon 
than  that  the  large  unoccupied  tracts  in  other  boroughs  should 
remain  unoccupied  while  the  pressure  of  population  is  as  great  as 
it  now  is.  If  we  are  not  satisfied  with  the  conditions  under  which 
office-buildings  and  tenements  are  now  being  erected  in  the  built-up 
portions  of  the  city,  let  us  by  all  means  make  them  more  stringent. 
These  two  policies — encouraging  the  use  of  unoccupied  land, 
and  determining  in  the  most  drastic  way  the  conditions  under  which 
buildings,  especially  tenement  buildings,  shall  be  erected — are  con- 
sistent and  complementary.  These  are  the  particular  measures 
recommended  by  the  congestion  commission  which  bear  directly 
upon  the  subject  of  congestion,  and  they  represent  a  policy  which 
sooner  or  later  we  shall  have  to  adopt.  It  will  be  better  for  the 
present  generation  and  that  of  the  immediate  future  if  it  is  adopted 
now. 


viii 


TABLE  OF  CONTENTS 

CHAPTER  I. 

THE  LAND    QUESTION    AND    HOUSING    REFORM    IN    AMERICAN    CITIES. 

Summary  of  Chapter. 

Most  housing  reformers  in  American  cities  have  failed  to  see  the 
relation  between  the  land  question  and  housing  reform.  A  sample 
attitude  is  that  of  the  Tenement  House  Committee  of  the  New  York 
Charity  Organization  Society,  which  stated  recently  with  regard  to 
bills  before  the  Legislature  making  the  rate  of  taxation  on  all  build- 
ings one-half  the  rate  of  taxation  on  all  land,  they  "are  not  consid- 
ered as  bearing  directly  on  the  improvement  of  housing  conditions 
or  the  relief  of  congestion."  Cheap  land  is,  however,  essential  to 
good  housing  for  wage-earners  at  reasonable  rents.  Heavy  taxa- 
tion of  land  values  will  mimimize  land  speculation,  make  and  keep 
land  availably  cheap,  encourage  the  substitution  of  healthy  tenements 
for  dark  disease  breeding  ones,  reduce  rents,  and  encourage  home- 
ownership  by  wage-earners.  Foreign  housing  experts  agree  to  the 
necessity  of  heavier  taxation  of  land  values.  This  has  been  em- 
phasized by  speakers  at  International  Housing  Congresses.  The 
English  Royal  Commissioners  on  Housing  recommended  in  1885 
taxing  "land  available  for  building  outside  of  towns  at  4%  on  its 
selling  value."  The  minority  report  of  the  English  Royal  Commis- 
sioners on  Local  Taxation  in  1901  recommended  that  the  site  bear 
heavier  taxation  than  the  structure,  and  that  there  should  be  also 
a  special  site  value  rate  to  be  charged  also  on  unoccupied  property 
and  on  uncovered  land. 


CHAPTER  II. 

THE    MORAL    SANCTIONS    FOR    HEAVIER   TAXATION    OF    LAND   VALUES. 

Summary  of  Chapter. 

Unless  any  measure  is  morally  just  no  plea  of  economic  or  fiscal 
expediency  will  justify  its  adoption.  The  heavy  taxation  of  land 
values  in  cities  is  moral  because  land  values  are  created  chiefly  by 
the  labor  and  industry  of  the  entire  population,  and  by  the  improve- 
ments made  by  government  at  the  expense  of  the  community.  Land- 

ix 


owners  in  cities  do  not  usually  take,  but  make  risks  through  desire 
for  speculative  gains.  Land  values  are  essentially  different  from 
any  other  values  such  as  those  of  agricultural  products,  manufac- 
tured goods,  etc.,  because  land  values  are  the  creation  of  social  ef- 
fort not  paid  for  by  the  owner,  who  taxes  others  as  a  condition 
of  their  using  values  they  themselves  create.  It  is  immoral  to  secure 
the  fruits  of  others'  toil  without  giving  them  something  in  return, 
but  this  the  landowner  by  securing  ground  rent  does,  since  he  taxes 
the  users  of  land  "all  that  the  traffic  will  bear"  on  values  they  col- 
lectively create.  The  owner  of  land  has  no  more  moral  right  to 
demand  permanently  as  large  a  net  return  upon  the  price  he  has 
paid  for  land  or  its  full  value  in  the  market  than  a  man  has  to 
demand  damages  from  the  Federal  government  when  a  protective 
tariff  upon  articles  which  he  manufactures  is  reduced  for  the  pub- 
lic good.  Like  the  beneficiary  of  the  protective  tariff,  the  land- 
owner has  never  been  morally  entitled  to  the  special  privilege  he 
enjoys  of  taxing  others.  To  undo  a  wrong  is  moral  and  not  im- 
moral. The  owners  of  land  adequately  improved  will  usually  bene- 
fit, however,  by  a  lower  tax-rate  on  buildings  and  a  higher  tax-rate 
on  land,  but  this  change  should  be  brought  about  gradually.  En- 
dorsement of  halving  the  tax-rate  on  buildings  by  the  Federation 
of  Churches  in  New  York  City. 

CHAPTER  III. 

RESULTS  OF  TAXING  BUILDINGS  AT  THE  SAME  RATE  AS  LAND. 

Summary  of  Chapter. 

Taxing  buildings  at  the  same  rate  as  land  values  results  in  the 
reverse  of  good  government;  it  makes  it  as  hard  as  possible  for  a 
man  to  do  right  and  as  easy  as  possible  for  him  to  do  wrong.  It 
puts  a  premium  upon  sloth  and  the  gambling  spirit,  discourages  in- 
dustry and  fetters  enterprise.  The  present  exemption  of  land  values 
from  adequate  taxation  puts  the  burden  of  government  upon  those 
least  able  to  bear  it,  and  levies  upon  widows,  consumptives  and 
children  for  the  support  and  protection  government  affords  to  the 
wealthy.  It  discourages  home  ownership  and  militates  against 
family  life  in  tenements.  It  encourages  extravagance  in  municipal 
government,  because  the  landlords  can  shift  a  large  part  of  the 
taxes  levied  on  their  property  on  to  their  tenants.  Taxation  on 
industry  and  buildings  instead  of  land  values  has  thus  stimulated 
also  the  policy  of  "postponed  payments"  because  owners  of  im- 
proved property  do  not  want  their  total  taxes  raised,  as  they  are 
under  a  uniform  tax-rate  on  buildings,  personalty  and  land  values. 


CHAPTER  IV. 

ALLEGED    OBJECTIONS    TO    HEAVIER   TAXATION    OF    LAND   VALUES. 

Summary  of  Chapter. 

In  addition  to  the  general  objection  that  heavier  taxation  of  land 
values  is  "confiscation  of  property  rights  and  immoral"  it  is  claimed 
that  it  "will  create  a  panic  in  real  estate,"  and  "result  in  the  calling 
in  of  loans,"  that  "adequate  transit  lines  alone  will  prevent  specu- 
lation in  land  without  heavier  taxation  of  land  values"  that  "a  higher 
tax-rate  on  land  than  on  buildings  and  personalty  is  unconstitu- 
tional," that  "other  sources  of  wealth  are  as  much  'unearned'  as 
increments  of  land  values,"  and  that  "if  the  city  secure  part  of  the 
increment  of  land  values  by  a  super  tax  on  the  increases  it  should 
recoup  the  owners  for  any  decrease." 

The  experience  of  Vancouver,  British  Columbia,  where  all 
buildings  are  exempt  from  taxation,  shows  that  no  panic  will  result 
from  a  gradual  reduction  in  the  tax-rate  on  buildings  and  final 
exemption  thereof,  and  that  money  can  be  secured  for  construc- 
tion of  buildings  although  a  low  tax-rate  on  land  values  does  not 
prevent  land  speculation  because  it  does  not  secure  for  municipal 
purposes  enough  of  the  ground  rent.  The  judgment  of  many  finan- 
ciers, and  heads  of  organizations  for  constructing  houses  for  wage- 
earners  is  that  halving  the  tax-rate  on  buildings  will  encourage  the 
construction  of  buildings  and  not  involve  a  panic  as  claimed.  Re- 
liance upon  transit  lines  alone  to  prevent  speculation  in  land  must 
mean  either  so  many,  as  to  be  a  great  and  unnecessary  cost  to 
the  city  or  as  experience  shows,  chiefly  a  means  of  making  fortunes 
through  increased  land  values  for  landowners  along  the  routes.  The 
United  States  Supreme  Court  has  given  an  opinion  that  "The  Four- 
teenth Amendment  was  not  intended  to  cripple  the  taxing  power 
of  the  states  or  to  impose  upon  them  any  iron  rule  of  taxation." 
The  power  of  taxation  is  largely  legislative,  state  courts  have  held, 
and  "all  the  incidents  are  within  the  control  of  the  legislature,"  so 
that  the  constitutionality  of  heavier  taxation  of  land  than  other 
property  seems  pretty  definitely  determined.  It  is  true  that  many 
other  incomes  are  as  "unearned"  as  land  increments,  and  it  is  pro- 
posed to  tax  land  values  including  increments  f  in  cities  for  municipal 
purposes  leaving  other  "unearned"  sources  to  the  state  and  federal 
governments,  for  the  present  at  least. 

Since  the  increase  in  land  values  is  due  only  in  small  measure 
to  efforts  of  the  owner  while  government  secures  only  a  small  part 
of  the  increment  by  a  land  increment  tax  it  is  perfectly  proper  that 
a  city  should  secure  a  share  of  bona  fide  increases  in  land  values, 

xi 


CHAPTER  VIII. 

SOURCES  OF  MUNICIPAL  REVENUE  IN  SOME  FOREIGN   CITIES. 

Summary  of  Chapter. 

Landowners  in  their  desire  to  postpone  heavier  taxation  of 
their  land  values,  will  suggest  many  other  sources  of  municipal 
revenue.  The  taxes  of  some  foreign  cities  show  how  successful 
landowners  have  been  there  in  providing  substitutes  for  taxation 
of  land  values.  Berlin  has  industrial  taxes,  taxes  on  incomes,  res- 
taurants, dogs,  department  stores,  automobiles,  brewing  malt,  tem- 
porary vendors,  exchange  of  property  and  trade  taxes.  Paris  still  per- 
sists in  putting  a  premium  on  darkness  by  taxing  doors  and  windows 
and  secures  about  $21,000,000  a  year  by  the  octroi  tax  on  goods 
entering  the  city  gates.  London  raises  nearly  two-thirds  of  its 
revenue  by  public  rates  on  real  estate,  which  is  largely  paid  by 
the  occupiers.  Berlin,  London  and  other  cities  rely  upon  "munici- 
pal trading"  such  as  gas  works,  tramways,  etc.,  and  taxes  upon  the 
gross  or  net  receipts  of  private  companies  conducting  such  busi- 
ness for  revenues,  but  these  as  well  as  most  of  the  municipal  taxes 
are  shifted  ultimately  to  the  consumer.  Dearer  gas,  dearer  food, 
and  more  carfare  injure  wage-earners  and  revenue  from  such 
sources  is  a  bad  substitute  for  taxing  land  values.  Most  of  these 
taxes  are  also  costly  to  collect. 

The  taxation  of  land  values  hitherto  has  been  largely  confined 
in  Germany  to  land  increment  taxes,  the  plan  adopted  in  England 
for  national  revenue.  Vancouver,  B.  C.,  has  abolished  all  taxes  on 
buildings,  and  some  cities  in  the  Australian  Commonwealth  have 
adopted  a  higher  rate  of  taxation  on  land  than  on  buildings,  es- 
pecially on  unimproved  land. 


CHAPTER  IX. 

POSSIBLE   METHODS   OF   TAXING  LAND   VALUES    IN    AMERICAN    CITIES. 

Summary  of  Chapter. 

Several  methods  and  degrees  of  taxing  land  values  are  possible : 

ist.     Lower  assessment  of  buildings  than  of  land,  and  reduc- 
tion in  assessment  for  depreciation  of  buildings  through  age. 

2nd.     A  lower  rate  of  taxation  on  all  buildings  and  personalty 
than  on  land. 

3rd.     Exempting  all  buildings  entirely  from  taxation. 

xiv 


4th.  Exempting  from  taxation  certain  buildings  which  con- 
form to  a  high  standard  of  excellence,  either  for  a  term  of  years, 
or  permanently. 

5th.    Assessing  all  public  improvements  upon  property  benefited. 

6th.    Excess  condemnation  of  land. 

7th.    Taxation  of  increment  of  land  value. 

8th.     Municipal  ownership  of  land. 

The  most  immediate,  practical,  economic,  and  just  method  of 
taxing  land  values  in  American  cities — in  which  land  and  improve- 
ments are  separately  assessed — is  a  heavier  rate  of  taxation  on  land 
values  through  a  lower  rate  of  taxation  on  all  buildings  and  per- 
sonalty. 

Halving  the  tax-rate  on  buildings  and  personalty  within  the 
next  few  years  is  the  next  step  towards  securing  freedom  from 
existing  land  slavery.  The  total  exemption  of  buildings  and  per- 
sonalty from  taxation  will  properly  and  naturally  follow  gradually. 
The  land  increment  tax  despite  its  great  administrative  difficulties 
is  a  practical  and  universal  method  of  recovering  for  the  community 
its  fair  share  of  the  community  created  and  earned,  land  values. 
The  other  methods  enumerated  are  limited  in  their  application,  or 
cumbersome  at  best,  and  do  not  conform  to  the  American  standard 
and  ideal  of  equality  and  justice,  although  temporarily  feasible.  Just 
taxation  of  land  values  and  a  land  increment  tax  will  furnish  ade- 
quate revenue  for  every  American  city  and  be  the  most  effective 
step  that  cities  as  governmental  entities,  can  take  to  exterminate 
poverty  and  to  regain  their  cities  for  the  people. 


XV 


CHAPTER  I. 

The  Land  Question   and   Housing  Reform  in 
American  Cities 

A  series  of  articles  which  has  been  running  in  The  Survey 
on  "The  Housing  Awakening  in  America"  records  the  strivings 
of  several  American  cities  to  secure,  not  only  the  abolition  of  the 
slums,  but  as  well  the  provision  of  good  homes  for  their  workers. 
The  recent  organization  of  the  National  Housing  Association  with 
a  Board  of  Directors  who  have  been  prominent  in  housing  reform 
in  cities  throughout  the  country  is  another  indication  of  the  recog- 
nition of  the  prevalence  of  the  housing  problem.  A  careful  study 
of  the  series  of  articles  on  "The  Housing  Awakening"  referred  to 
and  of  the  publications  of  the  National  Housing  Association  shows 
adequate  emphasis  upon  the  necessity  for  more  restrictive  housing  Housing 
legislation,  such  as  limits  upon  the  heights  of  tenements,  the  pro-  Reform  Legis- 
portion  of  the  lot  area  that  may  be  occupied,  provisions  as  to  cubic  lation  in 

air  space  to  prevent  room  overcrowding,,  and  the  determination  to  Amer*c®  c™efly 

j-  j  r™  r       ,         •  r  restrictive  to 

eradicate  slums  and  vaults.     Ihe  movers  for  housing  retorm  have  ^  . 

appreciated  the  necessity  for  cheapening  the  cost  of  housing 
material,  and  of  thereby  reducing  the  cost  of  constructing  tenements, 
so  encouraging  home  ownership  and  helping  to  lower  rents. 

Not  only  the  omission,  however,  of  any  reference  to  the  rela- 
tion between  the  taxation  of  land  values  and  the  housing  question, 
but  as  well,  the  actual  denial  by  many  housing  experts  on  the 
directorate  of  this  Association  of  any  vital  relation  between  the 
taxation  of  land  values  and  the  housing  problem  indicates  the 
failure  to  appreciate  a  fundamental  feature  of  their  program. 

The  New  York  City  Commission  on  Congestion  of  Population 
after  nearly  a  year's  study  of  causes  of  congestion  of  population 
and  room  overcrowding  and  methods  of  preventing  these  twin  evils, 
prepared  bills  providing  for  making  the  rate  of  taxation  on  all 
buildings  in  New  York  City  one-half  the  rate  of  taxation  on  all  Some  housing 
land.  experts  deny 

In   a  printed  memorandum   on  these  two  bills,   the   Tenement  direct  relation 


House  Committee  of  the  New  York  Charity  Organization  Society,  ~ 


f  lan 
of  which  Mr.  Lawrence  Veiller  is  Secretary,  actually  reported  that  values  and 

they  "are  not  considered  as  bearing  directly  on  the  improvement  of  good  housing. 


housing  conditions  or  the  relief  of  congestion."*   The  fact  that  Mr. 
Veiller  is  an  alleged  expert  on  housing  and  also  Secretary  of  the 
National  Housing  Association  necessitates  an  analysis  of  his  concep- 
tion of  the  housing  reform  which  presumptively  he  would  inculcate  in 
cities  throughout  the  country.     Unfortunately  his  point  of  view  is 
altogether  too  currently  accepted.     In  an  article  in  The  Survey  of 
November  iQth,  1910,  Mr.  Veiller  states,  "New  York  distinguished 
for  having  the  worst  housing  conditions  in  the  world,  but  long  the 
leader  of  housing  reform  in  America,  continues  that  leadership. 
Her  7,000  privies  are  now  a  thing  of  the  past,  and  her  100,000 
windowless  bedrooms  are  fast  disappearing."   In  his  book,  "Housing 
Reform,"  published  in  the  same  year,  Mr.  Veiller  states,  "The  con- 
New  York  City,  ditions  in  New  York  are  without  parallel  in  the  civilized  world.    In 
with  worst          no  cjty  Qf  Europe^  not  in  Naples  nor  in  Rome,  neither  in  London 
tiws^ln  °th    *      nor  m  Par*s>  neither  in  Berlin,  Vienna,  nor  Buda-Pesth,  not  in 
world,  has          Constantinople  nor  in   St.   Petersburg,  not   in  ancient  Edinburgh 
taxed  buildings  nor  modern  Glasgow,  not  in  heathen  Canton  nor  Bombay  are  to  be 
heavily,  lands      found  such  conditions  as  prevail  in  modern,  enlightened,  twentieth- 
century,  Christian  New  York.    In  no  other  city  are  there  the  same 
appalling  conditions  with  regard  to  lack  of  light  and  air  in  the 
homes  of  the  poor.     In  no  other  city  is  there  so  great  congestion 
and  overcrowding.     In  no  other  city  do  the  poor  so  suffer  from 
excessive  rents;  in  no  city  are  the  conditions  of  city  life  so  com- 
plex.   Nowhere  are  the  evils  of  modern  life  so  varied,  nowhere  are 
the  problems  so  difficult  of  solution." 

The  pride  of  participation  in  the  leadership  of  housing  reform 
under  which  such  uncivilized  and  unchristian  conditions  exist  and 
continue,  evidenced  in  the  above  statements,  is  a  matter  of  passing 
interest. 

The  important  point  for  those  interested  in  securing  good  hous- 
Intelllgent  ing  conditions  in  the  cities,  and  towns  as  well,  of  this  country,  is 

housing  re-  the  inevitable  result  admitted,  and  due  in  large  measure  to  the  f  ail- 
formers  must  ure  to  get  jnto  Opera^ion  or  rather  to  release  for  natural  operation 
reason  from  ,  ...  «  .  , 

cause  to  effect    t"056  economic  forces  which  would  tend  to  abolish  many  of  the 

housing  conditions,  noted  by  Mr.  Veiller,  in  New  York  City,  and 
which  exist  to  lesser  or  greater  degree  in  nearly  every  large  city  in 
the  country.  The  New  York  Tenement  House  Law,  enacted  in 
1901,  and  adopted  unfortunately  as  the  precise  model  by  many  other 
cities  in  the  country,  is  a  wonderful  example  of  restrictive  legisla- 

*  In  justice  to  some  members  of  this  committee,  it  should  be  stated  that  they 
disclaimed  knowledge  that  this  statement  was  included  and  do  not  agree 
with  it. 


tion,  in  most  respects  carefully  drawn.  The  size  of  bolts  to  a  frac- 
tion of  an  inch  is  laid  down.  Certain  provisions  are  made  as  to 
fireproofing,  although  four  story ,  tenements  t  are  not  so  safe  as  higher 
ones,  tending  to  excuse  if  not  actually  to  encourage  the  construction 
of  higher  ones. 

Most  of  the  restrictive  legislation  of  this  New  Tenement  House 
Law  is  valuable,  and  in  certain  respects  further  restriction  should 
be  enacted.  The  height  of  tenements  in  outlying  districts  should  be 
restricted  to  four  and  three  stories,  or  even  less ;  and  the  proportion 
of  the  lot  area  they  may  occupy  should  be  decreased.  The  cubic 
air  space  to  be  provided  for  each  occupant  of  an  apartment  should 
be  increased  and  some  provision  made  for  the  prevention  of  the 
overcrowding  which  on  grounds  of  health  such  a  regulation  attempts 
to  prevent. 

But  the  existing  restrictive  provisions,  admirable  though  they  Restrictive 
may  be,  have  not  served  to  reduce  room  overcrowding  nor  conges-  housing  legis- 

tion  per  acre.     Most  of  them  have  actually  increased   rents  and  l^\on  esse"tial> 

J '  but  must  be 

hence  room  and  apartment  overcrowding  and  congestion  per  acre.  safeguarded  by 

When  a  family  has  to  choose  between  having  enough  rooms  to  com-  lower  tax  rate 
ply  with  the  impulses  of  decency  and  privacy  or  even  with  the  inade-  on  buildings. 
quate  requirements  of  the  New  Tenement  House  Law,  and  having 
food,  they  default  on  the  housing,  health,  and  moral  safeguards, 
and  take  in  lodgers  so  they  may  buy  food.  Doubtless  their  logic 
seems  vicious  to  the  owner  of  land,  but  it  is  general  and  they  cannot 
be  too  seriously  blamed,  at  least  as  long  as  in  New  York  City  public 
relief  in  their  homes  is  not  permitted  to  the  victims  of  restrictive 
legislation,  on  the  one  hand,  and  a  policy  of  laisses  faire  on  eco- 
nomic causes  of  poverty  on  the  other  hand.  An  apparent  dilemma 
faces  every  housing  reformer  of  the  result  upon  the  wage-earners 
of  the  community  of  additional  restrictive  measures.  Is  it  really 
worth  while  to  secure  stricter  housing  regulations,  if  the  inevitable 
result  will  be  higher  rents,  and  a  lower  standard  of  living  for  the 
wage-earner,  including  the  taking  in  of  lodgers  with  the  conse- 
quent disruption  of  family  life?  The  dilemma  is  only  apparent, 
however,  since  while  restrictive  legislation  alone  will  increase  rents, 
its  influence  can  be  largely  counteracted  by  such  heavier  taxation 
of  land  values  as  will  terminate  the  ability  of  the  landlord  to  shift 
on  to  the  tenant,  in  higher  rents,  the  loss  entailed  upon  the  landlord 
by  legitimate  restrictive  measures. 

This  will  be  seen  by  taking  up  separate  objects  of  the  housing 
reformer  to  see  what  he  wants  to  accomplish.     It  is  admitted  by  want  to 
practically  every  economist,  as  shown  later,  that  the  proportion  of  accomplish. 


Abolition  of 

unsanitary 

conditions. 


Automatic  ef- 
fect of  heavier 
taxation  of 
land  values  in 
encouraging 
sanitary  con- 
ditions. 


the  tax  which  is  levied  on  the  land  is  paid  by  the  landowner  or  land- 
lord, and  that  that  part  which  is  levied  on  the  building  is  shifted  on 
to  the  tenant.  In  other  words,  if  all  taxes  were  taken  off  buildings 
and  put  on  land,  the  landowner  would  pay  the  taxes,  and  the  tenant 
would  escape  any  payment  of  taxes  whatsoever,  thereby  practically 
reducing  his  rent  to  this  extent.  The  heavier  tax-rate  on  land  will 
also  compel  the  adequate  improvement  of  land  in  order  to  meet  the 
carrying  charges.  Mr.  William  E.  Harmon,  a  well-known  real 
estate  operator,  with  realty  interests  in  many  cities  throughout  the 
country,  testified  on  this  matter  before  the  New  York  City  Commis- 
sion on  Congestion  of  Population :  "Probably  the  best  way  to  solve 
the  problem  of  congestion  would  be  to  double  the  tax  on  vacant 
land,  thus  reducing  the  tax  on  improvements.  If  you  increase  the 
tax  on  land  you  force  construction  to  offset  the  carrying  charges." 
The  housing  reformer  is  naturally  first  concerned, — since  in  no 
large  American  city  can  the  factory  population  be  immediately 
shifted  from  the  unsanitary  tenements  they  are  occupying  to  better 
ones  in  the  suburbs, — with  improving  the  conditions  of  old  tene- 
ments. 

Among  the  evils  existing  in  old  tenements  are  vaults,  dark 
rooms,  and  general  unsanitary  conditions.  Admittedly,  taxing  land 
values  alone  will  not  abolish  vaults  nor  dark  rooms.  These  twin  pests 
should  be  remedied  by  sumptuary  legislation,  vacating  houses  in 
which  the  former,  and  rooms  or  apartments  in  which  the  latter  are 
found. 

Nothing  can  excuse  the  cowardice  with  which  American  cities 
have  permitted  the  continuance  of  such  conditions,  because  landlords 
have  had  almost  complete  control  of  legislative  bodies,  and  in  many 
cities  have  been  able  even  to  thwart  the  administration  of  remedial 
laws. 

Two  American  cities,  Washington  and  Chicago,  have  secured 
legislation  empowering  the  demolition  of  unsanitary  buildings  unfit 
for  human  occupancy.  New  York  and  several  other  cities  have 
authority  to  vacate  tenements  that  are  not  adequately  ventilated  or 
are  defective  in  sanitary  arrangements.  Such  demolition  or  vacating, 
however,  is  always  difficult  to  secure,  because  courts  are  unalterably 
opposed  to  interfering  with  property  rights  if  they  can  avoid  it.  On 
the  other  hand,  the  heavy  taxation  of  land  values  would  be  an  auto- 
matic incentive  to  the  demolition  of  unsanitary  tenements  for  two 
reasons.  First,  old  buildings  are — if  the  assessment  is  even  fair — 
assessed  for  a  relatively  small  amount,  while  the  land  is  assessed  in 
the  built-up  sections  of  every  city,  rather  high.  A  heavier  rate  of 


taxation  on  land  than  on  buildings  would  mean  that  the  property  as 
a  whole  would  pay  more  taxes  than  under  a  uniform  tax-rate  on 
both  land  and  buildings,  and  by  far  the  larger  part,  in  many  cases 
practically  all  of  the  tax,  would  be  upon  land  values,  which  the 
owner  must,  in  large  measure,  pay  himself,  since  he  cannot  shift  it 
upon  the  tenants. 

Second,  the  higher  tax-rate  on  land  values  will,  as  testi- 
fied by  Mr.  Harmon,  force  construction  to  meet  carrying 
charges.  This  is  true,  not  only  of  vacant  land,  but  of  land 
which  is  underimproved,  that  is,  whose  improvements  are  not 
adequate  to  the  district.  In  most  cities,  a  normal  improvement 
is  assessed  for  at  least  twice  as  much  as  the  site.  There  are,  how- 
ever, in  nearly  every  city,  conditions  similar  to  those  in  the  lower 
part  of  Manhattan,  generally  known  as  the  East  Side.  Although 
the  majority  of  the  buildings  in  the  district  bounded  by  Grand 
Street,  the  East  River,  Manhattan  Bridge  and  Fourth  Avenue 
are  five  and  six  stories  high,  there  are,  in  1911,  fifty-seven  parcels 
of  land  entirely  vacant,  seventy-two  with  only  a  one-story  build- 
ing, one  hundred  and  eighty  with  only  a  two  or  two  and  a  half-story 
building,  and  four  hundred  and  ninety  with  only  a  three-story  or  a 
three  and  a  half-story  building.  A  heavy  tax  on  land  would  compel 
better  improvements  than  a  three-story  building  in  this  section  of 
the  city,  not  necessarily  implying  that  more  people  should  live  in 
these  sections,  but  a  larger  supply  of  tenements,  and  incomplete  as 
is  the  New  Tenement  House  Law  as  to  lighting  of  rooms,  its  sanitary 
requirements  are  far  superior  to  those  preceding  it.  The  tendency  of 
a  surplus  of  good  tenements  is  just  the  reverse  of  the  tendency  enun- 
ciated in  Gresham's  law  of  currency ;  good  tenements  tend  to  drive 
out  bad  tenements  by  reducing  the  demand  for  them.  An  alternative 
to  demolishing  houses  unfit  for  human  occupancy  at  the  owner's  cost, 
or  keeping  them  permanently  vacated,  is  the  English  method  of  de-  Payment  for 
molishing  unsanitary  tenements  and  paying  the  landowner  richly  for 
his  property  while  the  city  proceeds  to  construct  healthy  tenements 
for  those  displaced.  This  method  of  clearing  unsanitary  areas,  as  it  <y/Mm 
is  designated,  has  been  advocated  for  American  cities,  but  recourse  lordism. 
to  this  atrocious  method  of  paying  the  landlord  for  permitting  the 
deterioration  of  buildings  can  be  entirely  obviated  by  vacating  such 
buildings  and  taxing  the  land  at  such  a  high  rate  that  the  owner  will 
be  obliged  to  improve  it  adequately  with  suitable  buildings.  Since 
such  property  is  not  producing  any  revenue,  it  is  obvious  that  the 
higher  the  rate  of  taxation  on  the  land  the  greater  the  inducement  to 
the  owner  of  such  unsanitary  buildings  to  substitute  therefor  healthy 


Cheap  land 
essential  to 
proper  housing 
of  wage-earn- 
ing population 
in  American 
cities. 


revenue  producers.  The  converse  is  also  true,  that  the  present  uni- 
form rate  of  taxation  on  land  and  buildings  discourages  the  sub- 
stitution of  a  new  healthy  tenement  for  an  old,  cheap  and  unsani- 
tary one  by  penalizing  the  owner  with  heavy  taxes.  The  incentive 
a  higher  rate  of  taxation  on  land  than  on  buildings  gives  to  the 
wiping  out  of  slums  at  the  expense  of  the  beneficiaries  of  slum 
property,  instead  of  at  public  expense,  is  apparent. 

The  relation  of  the  taxation  of  land  values  to  housing  in  new 
communities  and  undeveloped  sections  of  cities  is  equally  patent. 

Cheap  land  is  essential  to  proper  housing  of  the  wage-earners 
in  American  cities.  Taxation  of  land  values  as  well  as  adequate 
restriction  upon  the  height  or  volume  of  buildings,  and  the  pro- 
portion of  the  lot  area  that  may  be  occupied  is  essential  to  keep 
land  so  cheap  that  wage-earners  may  afford  homes,  in  the  true 
sense  of  the  term.  Partly  because  the  New  York  City  Tenement 
House  Law  has  been  copied  in  so  many  American  cities,  we  are 
prone  to  think  of  housing  in  terms  of  multiple  family  tenements 
three  to  five  stories  high.  In  point  of  fact,  however,  three  stories 
should  be  the  maximum  height  for  tenements  in  every  American 
city  except  in  the  centers  where  existing  land  values  make  this 
impracticable.  Such  centers  will  in  most  cities  gradually  be  given 
over  to  business  and  commercial  purposes.  The  standard  for 
housing  enunciated  for  the  British  worker  by  Alden  &  Hay  ward 
in  their  book,  "The  Housing  Problem,"  should  be  adopted  in 
American  cities : 

"The  minimum  for  the  average  working  man's  family  is  a  cheap  but 
well-built  house  with  four  or  five  suitable  rooms,  together  with  a 
quarter-acre  garden,  or  at  least  a  fair-sized  courtyard.  The  site  should 
be  a  healthy  one  and  the  house  perfectly  sanitary,  well-lighted,  well- 
ventilated  and  well-drained.  And  this  accommodation  must  be  supplied 
at  a  low  rental,  or  it  will  be  found  beyond  the  means  of  the  working? 
classes." 

The  value  of  land  is  determined  by  its  accessibility  and  its 
net  rental  value.  A  high  rate  of  taxation  of  land  values  reduces 
the  selling  price  and  makes  it  cheaper.  Single  taxers  claim  the 
right  of  the  government  to  secure  by  taxation  a  large  part,  if  not 
all,  of  the  rental  value  of  land.  Most  housing  reformers  will  not 
go  as  far  as  this  yet,  but  will,  nevertheless,  agree  as  to  the  desir- 
ability of  preventing  land  speculation  as  a  means  of  keeping  down 
land  values  and  the  effectiveness  of  taxing  land  values  as  a  means 
of  accomplishing  this. 


The  selling  price  of  land  is  determined  by  the  capitalization 
of  the  net  rentals  from  the  maximum  intensive  use  permitted. 
Thus  if  forty  families  may  be  legally  housed  in  a  high  tenement 
and  six  per  cent  net  is  the  usual  return,  the  owner  will  ask  a 
price  for  the  land  which,  with  the  cost  of  constructing  the  build- 
ings, will  yield  a  return  from  the  rental  at  current  rates,  $4.50 
to  $5.00  a  room  per  month.  If  only  three  families  can  legally 
be  housed  on  such  a  lot,  the  net  return  of  six  per  cent  upon  the 
value  of  the  land  will  ensure  a  lower  price.  Since,  except  in 
crowded  sections  of  a  city,  and  with  abnormal  demand  for  hous- 
ing accommodations,  the  tax  upon  land  cannot  be  shifted  to  the 
tenant,  while  the  cost  on  buildings  can  be,  and  is  so  shifted,  a 
reduction  of  even  ten  to  twenty  per  cent  in  rent  will  be  a  great 
relief  to  the  rent-payers,  i.  e.,  all  tenants  in  American  cities — as 
well  as  people  who  are  trying  to  own  their  own  homes.  A  $2 
tax-rate  per  $100  of  assessed  valuation  is  a  common  tax-rate 
where  real  estate  is  assessed  at  full  value.  With  such  a  tax-rate 
the  total  taxes  upon  a  tenement  accommodating  twenty  families 
assessed  for  $25,000,  on  a  site  assessed  for  $15,000 — a  total  of 
$40,000 — would  be  $800  a  year.  Of  this  $800,  $500  is  the  tax  upon 
the  building  and  $300  upon  the  land.  If  buildings  and  personalty 
were  exempt  from  taxation,  the  tax-rate  on  land  would  be  in  most 
American  cities  somewhere  between  $3  and  $4  per  $100  of 
full  assessed  valuation,  depending,  of  course,  upon  the  relative 
assessed  value  of  land  and  buildings  and  personal  property  on  the 
basis  of  which  value  the  tax-rate  is  determined.  Taking  $3  as  a  Heavy  taxation 
maximum  rate  of  taxation  on  land,  however,  the  total  oj  land  values 
taxes  on  the  tenement  property  would  be  only  $450  or  rg 
$350  less  than  with  a  uniform  rate  of  taxation  on  land 
and  buildings  of  $2.  Since  the  owner  must  pay  the  taxes 
on  land  and  cannot  shift  this  on  to  the  tenant  he  will  have 
to  pay  $150  more  than  under  a  uniform  rate  of  taxation.  At  the 
same  time,  the  total  amount  of  taxes  on  the  property  is  $350  less. 
To  what  extent  will  the  tenant  profit  by  this  reduction?  It  is 
apparent  that  the  owner  of  the  property  can  reduce  his  total  rentals 
for  twenty  apartments  by  $350  and  still  make  the  same  net  profit 
as  under  the  uniform  $2  tax-rate.  This  would  mean  a  possible 
reduction  of  rental  of  $17.50  per  apartment.  If  we  assume  that 
each  apartment  was  renting  for  $180  a  year,  this  would  mean  a 
reduction  of  only  about  one-tenth  in  the  rental,  which,  nevertheless, 
is  worth  while.  There  are  several  other  factors  and  economic 
forces  which  would  operate,  however,  to  reduce  rentals  if  land 


were  more  heavily  taxed.  The  increased  tax-rate  of  $i  means  only 
i  per  cent  additional  charge  for  taxes,  3  per  cent  instead  of  2 
per  cent,  that  is  $150  a  year  more  on  an  investment  of  $15,000. 

A  fair  system  of  assessment  of  land  is  assumed,  of  course,  in 
this  statement,  and  with  this  a  vacant  lot  next  to  a  lot  assessed  for 
$15,000  with  a  tenement  assessed  for  $25,000  is  also  assessed  for 
$15,000.     The  owner  of  the  vacant  lot  is,  however,  paying  assess- 
ments  for   sewers,    streets,   sidewalks   and  other  public   improve- 
ments which  are  necessary  to  attract  population  or  is  putting  these 
in  at  his  own  expense.     His  carrying  charges  on   the   land   are 
probably  at  least  3  to  4  per  cent  in  addition  to  interest  at  5  per 
cent  to  6  per  cent.     On  the  other  hand,  he  is  aware  that  if  he  puts 
up  a  tenement  similar  to  his  neighbor's  he  will  be  saved,  if  his 
tenement  be  fully  occupied,  $350  a  year  or  nearly  i  per  cent  over 
his  charges  under  a  uniform  rate  of  taxation  on  land  and  buildings, 
which  he  can  offer  as  an  inducement  to  attract  tenants.    There  are 
thus  the  inducement  to  build  and  the  penalty  for  not  building  im- 
pelling him  to  put  up  such  a  tenement,  while  in  addition  the  higher 
tax-rate  reduces  the  selling  value  of  his  land,  and  the  consequent 
amount  of  the  community  earned  increment  of  ground  rent  which 
he  would  secure  under  a  uniform  rate  of  taxation  on  land  and 
The  higher  the  buildings.     If  the  rate  of  taxation  on  land  were,  however,  $3.50 
tax-rate  on         or  <^  instead  of  $3,  the  inducement  to  improve  his  land  would  be 
qreater  the         ^at    mucn    grater.     Even    under  a  $3  tax-rate  upon  land,  and 
reduction  of        tne  resultant  larger  number  of  tenements   competing  for  tenants, 
rents.  it  is  apparent,  however,  that  the  owner  of  tenement  property  would 

reduce  rents  by  more  than  the  total  saving  in  taxes  of  $350.  To 
what  extent  he  would  do  this  is,  of  course,  problematical,  but  it 
would  probably  be  by  at  least  the  $150  extra  taxes  on  the  land 
which  he  must  pay  and  formerly  could  shift  on  to  the  tenant,  plus 
the  $350  saved  in  taxes  on  the  building  or  a  total  of  $500,  i.  e.,  $25 
for  every  one  of  the  twenty  tenants.  The  same  proportionate  re- 
duction of  rents  would  naturally  be  effected  in  a  tenement  assessed 
for  $5,000  to  accommodate  three  families  on  a  lot  assessed  for 
$1,500. 

The  direct  saving  to  the  prospective  or  would-be  owner  of  his 

Taxation  of        own  home  is  equally  demonstrable.     It  is  not  germane  to  discuss 

land  values  will  here  the  relative  advantages  or  disadvantages  of  having  the  un- 

encourage  skilled  worker  or  even  the  skilled  artisan  own  his  home  under  the 

°™e  (  present  conditions  of  industry.    That  there  cannot  be  any  ultimate 

solution  of  the  labor  problem  but  one  which  makes  the  ownership 

of  private  property  possible  for  the  majority  of  the  urban  popula- 


tion  of  the  country  stands  to  reason,  and  does  not  require  any  argu- 
ment in  this  country  where  the  ownership  of  private  property  has 
been  and  will  continue  to  be  a  fundamental  conservative  safeguard 
of  democracy.  Classification  of  property,  and  regulation  of  prop- 
erty rights,  is  distinct  and  apart  from  the  abolition  of  private  prop- 
erty, advocated  by  some  extremists. 

Whether  the  wage-earners  own  their  homes  individually  or 
collectively  through  owning  shares  in  co-operative  building  associa- 
tions, or  membership  in  savings  and  loan  associations,  they  will 
benefit  by  a  lower  tax-rate  on  buildings.  Of  course,  if  a  wage- 
earner  buys  even  a  single  lot  of  land  for  the  speculative  increase 
in  land  value,  he  should  be  treated  exactly  as  any  other  land 
speculator  whether  he  owns  one  lot  or  as  a  real  estate  company  ad- 
vertises 20,000  lots. 

With  a  uniform  rate  of  taxation  of  $2  the  owner  of  a  home 
assessed  for  $1,500  on  a  lot  assessed  for  $500  would  pay  in  taxes 
$40  a  year.  With  a  tax-rate  of  $3  on  land  and  no  tax  on  buildings 
he  would  pay  only  $15  a  year  in  taxes,  i.  e.,  would  save  $25  a  year, 
that  is  one-thirtieth  to  one-twenty-fifth  of  his  total  earning. 

If  the  owner  of  the  house  has  been  able  to  buy  only  the  lot  out- 
right and  to  pay  $500  on  the  price  of  the  house,  borrowing  the 
balance  of  the  cost,  $1,000,  at  5  per  cent  interest,  his  annual  interest 
charges  will  be  $50  a  year.  The  saving  in  taxes  with  the  exemption 
of  his  building  from  taxation  would  in  twenty-two  years,  assuming 
only  a  moderate  increase  in  the  rate  of  taxation  on  land,  enable 
him  to  pay  off  the  entire  mortgage  on  his  house,  while  his  interest 
charges  would  be  annually  decreased  by  his  payments  thereon. 
That  such  a  minimum  saving  of  at  least  $20  to  $25  a  year  would  be 
an  advantage  to  wage-earners  in  American  cities  can  hardly  be 
questioned  even  by  those  who  have  the  temerity  to  assert  that  tax- 
ation of  land  values  is  not  considered  "as  bearing  directly  on  the 
improvement  of  housing  conditions  or  the  relief  of  congestion." 

Naturally  the  man  who  buys  his  lot  on  the  installment  plan,  until 
he  is  ready  to  build,  would  have  to  pay  $5  a  year  more  taxes  under 
the  conditions  suggested  but  at  the  same  time  he  is  saved  mean- 
while at  least  $28  to  $25  as  tenant,  which  leaves  a  good  margin  of  Dr.  E.  T.  De- 
saving,  vine's  endorse- 

Dr.  E.  T.  Devine,  Secretary  of  the  New  York  Charity  Organiza-  ment  °f  mak™ 

tion  Society  and  Schiff  Professor  of  Social  Economics  in  Columbia  \he  ™te  °f 
TT   .         .  .  taxation  on 

University,  says  with  reference  to  the  proposal  to  make  the  rate  gildings  one- 

of  taxation  on  buildings  one-half  the  rate  of  taxation  on  land  in  half  the  rate 
New  York  City:  on  land. 


Foreign  hous- 
ing experts 
agree  to  vital 
relation  be- 
tween taxation 
of  land  values 
and  housing 
reform. 

Land  specula- 
tion militates 
against  cheap 
housing. 


"The  change  is  one  which  would  have  far  reaching  and  beneficent 
results.  It  would  force  unoccupied  land  into  use,  increase  the  supply 
of  new  tenements,  and  so  reduce  rents.  Yet  it  would  do  this  by  favor- 
ing builders  and  owners  of  tenements  rather  than  by  putting  new  and 
additional  burdens  upon  them.  Of  course  so  far  as  it  encouraged  new 
buildings  it  would  diminish  the  monopoly  advantages  of  present  owners 
and  builders,  and  from  the  point  of  view  of  the  public  interest  this  is 
exceedingly  desirable.  With  the  pressure  of  population  in  New  York 
there  is  no  difficulty  about  filling  any  tenements  or  apartments  of  any 
class  if  the  rents  are  reasonable,  and  by  reducing  the  relative  taxation 
on  buildings  both  old  and  new  we  increase  the  chances  of  reasonable 
rents. 

"If  our  population  and  factories  were  properly  distributed  there 
would  be  no  ground  for  complaint  as  to  congestion.  Increasing  the 
relative  taxation  on  unoccupied  land,  and  diminishing  the  tax  upon 
buildings  and  improvements  tend  to  bring  about  this  distribution." 

Referring  also  to  limitations  on  the  heights  of  tenements  pro- 
posed, Dr.  Devine  says : 

"These  are  the  particular  measures  recommended  by  the  congestion 
commission  which  bear  directly  upon  the  subject  of  congestion,  and  they 
represent  a  policy  which  sooner  or  later  we  shall  have  to  adopt.  It  will 
be  better  for  the  present  generation  and  that  of  the  immediate  future 
if  it  is  adopted  now." 

In  this  view  most  thoughtful  persons  who  are  not  apologists 
for  the  status  quo  of  poverty  will  agree. 

The  testimony  of  housing  experts  abroad  to  the  necessity  of 
invoking  heavy  taxation  of  land  values  to  secure  cheap  housing  for 
wage-earners  is  striking.  Dr.  Wilhelm  Mewes  of  Diisseldorf,  Ger- 
many, in  an  address  on  the  "Land  Question"  at  the  International 
Housing  Congress  in  London,  in  1907,  states: 

"Even  among  economists  Land  Speculation  is  not  considered  quite 
with  abstract  indifference,  though  economically  land  speculation  in  itself 
appears  as  justifiable  as  any  other  speculative  business  activity;  only  its 
outgrowths  appear  to  deserve  attack.  These  outgrowths  are  indeed 
practically  largely  to  the  front,  thanks  to  the  peculiarities  of  land.  Since 
the  foundation  of  the  land  value  is  the  return  that  can  be  made  from 
it,  and — contrary  to  goods  which  can  be  increased  at  will — the  costs  of 
production  play  a  secondary,  often  very  secondary,  part,  the  subjective 
intention  plays  an  extraordinarily  large  one.  Often  when  the  price  is 
considered,  the  future  return  of  the  piece  of  land  is  discounted  before- 
hand, especially  in  times  when  business  is  good,  and  people  can  reckon 
on  a  favorable  future  development.  At  the  sale  of  unbuilt-on  land, 
prices  have  often  been  reckoned  which  after  the  building  had  to  be 
seriously  reduced  in  order,  together  with  the  building  value,  to  give  an 
obtainable  return.  In  sympathy  the  outer  lands  of  towns  rise  often  to 
such  a  height  that  they  have  to  be  used  as  intensively  as  lands  in  the 
inner  parts. 


10 


"Although  taxation  according  to  market  value  appears  to-day  the 
best  form  of  existing  tax,  yet  it  does  not  suffice  as  the  only  tax  to 
grapple  with  the  rise  in  value  of  land. 

"It  deals  alike  with  all  land  of  equal  value,  but  does  not  allow 
taxation  of  the  unearned  increment  which  accrues  to  the  owner  by  sale 
in  accordance  with  the  improvement  in  his  financial  position.  Thus  a 
further  tax  becomes  necessary  connected  with  change  of  ownership. 

"To-day  a  state  tax  on  change  of  ownership  is  raised  almost  univer- 
sally according  to  a  percentage  of  the  value.  Yet  this  in  no  way  answers 
to  the  real  financial  position;  it  is  also  due  when  there  is  no  gain  or 
very  little.  Besides,  it  regularly  falls,  not  on  the  party  which  has 
actually  made  the  gain,  but  on  the  buyer.  For  these  reasons  there  are, 
on  financial  grounds,  real  objections  to  be  made  against  the  often  pro- 
posed raising  the  scale  of  this  tax  on  change  of  ownership.  Rather  it 
is  far  fairer  to  develop  the  tax  on  property  changing  hands  into  a  tax 
on  unearned  increment. 

"This  tax  regularly  takes  a  certain  percentage  of  the  unearned 
increment  from  the  seller.  The  height  of  the  percentage  is  graded 
according  to  the  length  of  ownership  and  the  rise  in  value  of  the  land. 

"The  introduction  of  this  tax  has  roused  vigorous  discussion  and 
debate  everywhere.  It  must  be  admitted  that  it  involves  no  slight  prac- 
tical difficulties  (e.  g.,  in  settling  the  amount  of  the  rise  in  value,  the 
grading  of  the  percentage  of  the  tax,  the  settling  the  amount  of  the 
minimum  increase  of  value  which  is  to  be  untaxed,  the  maximum  per- 
centage  of  the  tax,  and  so  on),  and  so  far  the  experiments  are  few. 
But  on  principle,  objections  of  any  weight  can  hardly  be  made  to  this 
method  of  taxation,  at  least  in  its  improved  form.  That  other  unearned 
gains  are  not  taxed  is  no  objection  to  the  taxation  of  unearned  gains 
from  land.  To  begin  with,  the  amount  of  the  latter  is  quite  excep- 
tional; then  technically  these  gains,  owing  to  our  law  of  real  property, 
are  much  more  easily  coped  with  than  those  in  ordinary  trades." 

Councillor  John  S.  Nettlefold,  of  Birmingham,  England,  says :      Councillor 

"Those  who  have  observed  the  existing  housing  conditions  in  this    ,  , ,      ,' 
country  are  aware  that  in  the  vast  majority  of  cases  poor  people  live  .         , 

on  dear  land  and  rich  people  live  on  cheap  land,  'which  is  absurd.'  ^  ^      , 

"The  consideration  of  the  question  how  to  house  properly  the  prevent  "land 
people  of  England  on  the  land  of  England  reminds  us  that  in  theory  the  sweating  " 
land  of  England  belongs  to  the  Crown,  and  through  the  Crown  to  the 
people.  In  practice  it  belongs  to  a  large  number  of  individuals,  whose 
object  is  (and  under  present  circumstances,  no  fair-minded  man  can 
blame  them)  to  get  as  much  as  possible  out  of  their  land.  This  is  just 
what  the  business  man  does  with  his  brains  and  the  working  man  does 
with  his  labor;  but  all  sorts  of  laws,  from  the  Factory  Act  onwards, 
have  been  enacted  to  prevent  capitalists,  brain-workers,  and  hand- 
workers from  making  money  by  sweating  their  fellow-citizens;  whereas 
no  law  has  yet  been  enacted  in  this  country  to  prevent  land-sweating — 
that  is,  the  reckless  overcrowding  of  human  beings  on  the  land  in  badly- 
planned  towns.  This  omission  has  not  only  seriously  injured  the 

II 


vitality,  and  therefore,  also  the  wealth-producing  power  of  large  num- 
bers of  English  men  and  women;  it  has  also  resulted  in  the  wasteful 
neglect  of  the  food-producing  possibilities  of  more  than  half  the  land 
in  this  country. 

"Manufacturers  are  already  prevented  by  law  from  making  profits 
out  of  unhealthy  workshops,  and  the  legislature  endeavors  to  prevent 
the  sweating  of  individuals  at  their  work.  It  is  high  time  a  well  con- 
sidered attempt  was  made  to  prevent  individuals  being  sweated  in  their 
homes.  This  sweating  of  the  people  in  their  homes  is  largely  due  to 
land  speculation,  which  is  really  nothing  more  or  less  than  land 
sweating." 

Alden  and  Hayward,  in  their  book  on  "Housing,"  state : 

"Where  urban  land  is  in  possession  of  a  few  great  land-owners  who 
practically  own  some  of  our  cities  and  who,  in  many  cases,  deliberately 
keep  back  much  of  the  unused  land  for  the  rise  in  value  which  is  cer- 
tain to  come — only  the  minimum  amount  possible  will  be  purchased  for 
housing  purposes.  It  is  obvious  how  direct  must  be  the  connection 
between  this  dearness  of  land  and  such  evils  as  overcrowding,  lack  of 
open  space  and  general  insanitary  conditions  of  living. 

Effects  of  "But  another  ill  effect  which  this  artificial  value  of  land  has  upon 

"corners"  in  our  cities  is  its  creation  of  that  house  famine  of  which  we  have  already 

land  on  the  spoken.     We  have  seen  that  private  enterprise  has  very  largely  failed 

housing  ques-  to    supply    a    sufficient    quantity   of    dwelling-houses    for    the    working 

tion  and  means  classes.     One  of  the  main  reasons   for  this  is  that,  in  consequence  of 

of  preventing  the  high  price  of  land,  buildings  cannot  be  put  up  at  a  rent  which  it 

such  "corners."  would  be  possible  for  the  workers,  who  need  such  houses,  to  pay,  and 

which  would  at  the  same  time  make  a  safe  investment  for  the  builder. 
It  has  been  pointed  out  that  this  is  so  even  in  the  case  of  building 
enterprise  not  strictly  'private.'  This  'corner'  in  land  has  operated  very 
injuriously  on  those  semi-public,  semi-philanthropic  bodies  such  as  arti- 
sans' dwellings'  companies  and  co-operative  societies,  that  have  been 
endeavoring  to  cope  with  the  deficiency  in  the  supply  of  good  houses. 
So  much  has  their  work  been  hampered  by  this  and  other  causes,  that 
the  great  public  companies  and  trusts,  after  building  over  30,000  dwell- 
ings, have  practically  suspended  operations  during  the  last  ten  years,  in 
spite  of  the  average  return  of  four  and  a  half  per  cent,  which  they  get 
on  their  capital. 

"But  by  some  means  or  other  'there  must  be  freer  access  to  the 
land  if  there  is  to  be  a  lessening  of  the  evils  of  overcrowding  in  our 
cities. 

"Yet  another  argument  which  may  be  adduced  in  favor  of  the  rating 
of  site  values,  is  that  in  consequence  of  urban  land  coming  more  freely 
into  the  market  and  building  enterprises  being  stimulated,  rent  would 

Sir  Henry  be  materially  relieved;  and  this  relief  would  come  where  rent  is  now 

Campbell-  at  its  maximum,  i.  e.,  in  our  large  industrial  centers.   As  we  have  seen, 

Bannerman  it  is  just  here  where  rent  presses  most  severely  on  our  poorest  classes, 

says  taxing  of  and  any  relief  of  this  pressure  would  have  a  salutary  effect,  especially 

land  values  in   the    direction  of  slum  clearances.     Every  opportunity  given  to  the 

will  stop  the  freer  growth  of  the  city  in  the  suburbs  will  tend  to  reduce  the  conges- 

12 


tion  at  the  center.  Abolition  of  restrictions  in  the  matter  of  the  hous- 
ing of  the  people  will  have  the  same  effect  as  in  the  matter,  of  the 
people's  food,  viz.,  increased  distribution  of  supply  at  a  lower  price. 
'Overcrowding,'  as  Sir  Henry  Campbell-Bannerman  recently  observed, 
'is  to  a  large  extent  due  to  the  maintenance  of  the  same  sort  of  restric- 
tions and  privileges  at  home  as  Free  Trade  has  abolished  for  inter- 
national commerce.  The  taxation  of  land  values  will  put  an  end  to  the 
immunity  of  the  landlord  enriched  by  the  exertions  of  others,  to  the 
circumscribing  of  natural  expansion/  It  is  this  'natural  expansion' 
which  is  the  all-important  matter  in  the  question  of  housing  our 
workers.  It  is  this,  and  this  alone,  that  will  materially  lessen  the  heavy 
charge  of  rent;  and  so  the  rating  of  land  values  is  a  proposal  to  be 
commended  because,  by  aiding  natural  expansion,  it  will  thus  tend  to 
reduce  rents. 

"The  most  important  Minority  Report  furnished  by  five  out  of  the 
fifteen  Royal  Commissioners  on  Local  Taxation  in  1901,  signed  by  the 
Chairman  of  the  Commission,  Lord  Balfour  of  Burleigh,  contains  the 
following  recommendations : 

(1)  Sites  should  be  separately  valued  from  structure. 

(2)  Site  can  bear  heavier  taxation  than  structure,  but  all  existing 

contracts  must  be  rigidly  respected. 

(3)  There  should  be  a  special  site  value  rate. 

(4)  This  should  be  charged  also  on   (a)   unoccupied  property,  and 

(b)  on  uncovered  land. 

"The  general  conclusion  of  that  report  was  that  the  proposal  to  rate 
site  values  'would  do  something  towards  lightening  the  burdens  in  this 
respect  of  building,  and  thus  something  towards  solving  the  difficult  and 
urgent  housing  problem.'  This  report  only  followed  in  the  steps  of 
the  Royal  Commissioners  on  Housing  who,  as  far  back  as  1885,  recom- 
mended taxing  'land  available  for  building'  outside  our  towns  at  4%  on 
its  selling  value." 


immunity  of 
the  landlord 
enriched  by 
the  exertions 
of  others. 


Minority  Re- 
port of  the 
English  Royal 
Commission  on 
Local  Taxation 
favors  higher 
taxation  of 
land  values. 

English  Royal 
Commissioners 
on  Housing 
recommend 
4  per  cent  tax 
rate  on  selling 
value  of  "land 
available  for 
building"  out- 
side of  towns. 


CHAPTER    II. 

The  Moral  Sanctions  For  Heavier  Taxation  of 

Land  Values 

Fortunately  the  appeal  to  morality,  that  is  to  our  sense  of  justice, 
is  the  most  successful  and  fundamental  appeal.    No  economic  theory 
whose  morality,  as  well  as  economic  advantages,  cannot  be  estab-   Moral  sanction 
lished  is  worthy  of  consideration,  nor  will  it  gain  general  acceptance  essenha   to  *  e 
in  any  community.     The  cry  of,  "confiscation  of  property  rights"  any  tconomk 
is  raised  by  the  opponents  of  taxing  land  values,  and  the  fundamen-  theory  or 
tal  question  whether  government  is  really  robbing  people,  whether  fiscal  policy. 
rich  or  poor,  of  anything  that  is  morally  theirs  must  be  met  by  the 
advocates  of  the  taxation  of  land  values.     Legal  robbery  by  the 
government,  whether  through  a  tariff  imposed  by  the  Federal  gov- 
ernment, or  any  tax  imposed  by  a  city  or  state,  is  so  serious  a  wrong 
that  no  economic,  fiscal  or  social  benefits  to  be  derived  by  such  a 
tax  would  justify,  or  excuse  it. 

What  is  the  moral  sanction   for  the  taxation  of  land  values, 
whether  it  be  achieved  by  a  land  increment  tax,  abolishing  all  taxa- 
tion of  buildings  and  improvements,  reducing  the  assessment  or  the 
rate  of  taxation  on  all  such  buildings  and  improvements  to  one-half 
or  one-quarter  the  rate  of  taxation  on  land,  exempting  buildings 
of  a  certain  high  standard  of  excellence  from  taxation  for  a  period 
of  years  or  permanently,  or  by  any  other  method  of  taxation  making  jfl^°  ™£u 
land  values  pay  a  larger  proportion  of  the  cost  of  government  than  must  ^e  con. 
at  present?    No  argument  on  this  subject  is  new,  but  a  world-wide  sidered  on  its 
interest  in  the  subject  evidenced  by  recent  legislation  justifies  care-  merits  apart 
ful  consideration  thereof.     We  have  fortunately  reached  the  stage  ^rom  brei*~ 
in  consideration  of  public  policies  where  we  can  and  do  consider 
subjects  upon  their  merits,  and  so  in  the  consideration  of  this  ques- 
tion, we  need  not  concern  ourselves  with  the  question  of  whether 
this  is  "single  tax/'  "Henry  Georgeism"  or  any  other  system,  but  Land  values 
merely  whether  it  is  a  moral  proposal.  are  due 

It  is  generally,  almost  universally  conceded  that  land  values  in  primarily  to 
cities  are  due  largely  to  the  demand  for  use  of  land  by  the  popula-  demand  for 
tion  for  various  purposes,  industrial,  commercial,  residence,  etc.,  u™  an( 
and  to  the  improvements  made  by  the  city.  This  is  admitted  by  real 
estate  dealers  and  operators  as  frankly  as  by  those  who  advocate  city. 

15 


Landowners 
make  but  do 
not  take  any 
large  risks  in 
land  owner- 
ship. 


Profits  are  not 
so  sure  in 
most  businesses 
as  in  land 
ownership  and 
development. 


any  method  of  taxing  land  values.  The  real  estate  dealers  base 
their  claim  that  land  values  will  increase  upon  the  admitted  fact  of 
increase  in  population,  but  assume  the  right  of  the  owner,  not  only 
to  the  increase  in  value  of  land,  but  to  at  least  the  same  net  return 
upon  such  value  of  land  as  is  regarded  fair  upon  other  investments. 
Many  go  even  further  and  claim  the  right  of  the  owner  of  land  to 
make  all  the  profit  "that  the  traffic  will  bear."  Both  classes  of  real 
estate  owners — and  at  least  inferentially  the  majority  of  most  com- 
munities who  permit  them  to  have  all  that  they  claim, — admit  there- 
fore the  right  of  a  limited  class  in  the  community  to  secure  some- 
thing from  the  rest  of  the  community  without  giving  any  return 
therefor.  The  excuse  for  this  procedure,  by  which  in  essence  all 
the  landless  members  of  the  community  work  without  compensa- 
tion for  the  landowning  members  of  the  community  is  that  the 
owner  of  land  takes  all  the  risks  of  investment.  This  claim  is  inter- 
esting but  not  true  under  present  conditions.  The  owner  of  land 
does  not  so  often  take  risks  as  make  risks.  The  very  slight  risk 
which  the  owner  of  land  in  a  city  may  incur  is  chiefly  not  inherent, 
but  due  first  to  his  own  speculative  instinct  and  desire  for  specula- 
tive gains,  and  second  to  the  failure  of  the  city  to  determine  what 
the  development  of  the  city  shall  be.  Almost  every  American  city 
is  at  the  mercy  of  real  estate  operators  and  developers,  who  go  a 
long  distance  from  the  center  of  the  city  to  secure  land  still  assessed 
at  acreage  or  at  least  very  cheap,  which  they  break  up  into  lots 
and  try  to  sell  at  high  lot  prices.  The  cost  of  carrying  such  lots  and 
the  investment  in  streets,  sewers,  sidewalks,  etc.,  is  something  of  a 
risk  which  the  owners  voluntarily  assume  in  the  hope  and  well 
founded  expectation  of  a  large  increase  in  land  values.  This  is 
an  incidental  risk,  however,  to  real  estate  development  and  deal- 
ing, which  with  the  growth  of  the  city  is  not,  as  has  been  stated  an 
inherent  risk.  The  vast  sums  of  money  spent  on  advertising  and 
cajoling  people  to  buy  land  at  a  greater  distance  from  the  centers 
of  cities  and  in  private  developments  are  of  course  similarly  wastes. 

In  no  other  kind  of  business  (except  that  protected  by  some 
equally  unjust  privilege  whether  it  be  tariff,  patent,  or  other  legis- 
lative favor)  are  the  profits  so  sure  as  dealing  in  land,  for  the  rea- 
son so  obvious  to  land  developers  in  advertising  their  land,  and  so 
vigorously  denied  by  them  when  taxation  of  land  values  is  sug- 
gested, that  the  amount  of  available  land  in  every  city  is  limited  and 
the  demand  for  land  is  certain. 

It  must  be  admitted  that  most  moral  arguments,  as  well  as  argu- 
ments from  a  fiscal,  economic  and  social  point  of  view  which  can  be 

16 


advanced  for  the  taxation  of  land  values  can  also  be  advanced  for 
the  single  tax,  that  it  is  only  a  question  of  expediency  and  not  one 
of  essential  difference. 

To  recognize  the  fundamental  injustice  of  an  existing  condition 
or  system  does  not  imply  that  it  is  either  just  or  expedient  to  upset 
the  entire  condition  or  system  immediately,  nor  by  drastic  measures. 
It  is  often  claimed  by  the  opponents  of  the  single  tax  that  this  sys-  Heavy  taxation 

tern  of  taxation  would  abolish  private  property  in  land.    Single  tax-  °f  land  values 

r  .    J .  must  come 

ers  to-day  do  not  attack  private  property  m  land,  but  merely  the  siowiy  ^ut 

"untaxed  ownership  of  our  day  and  generation."  does  not  de- 

As  Mr.  C.  B.  Fillebrown,  in  his  book  "The  A  B  C  of  Taxation,"   stroy  private 
remarks :  ownership.        ^ 

"It  may  be  confidently  asserted  that  when  Henry  George  said, 
'Private  property  in  land  is  unjust,'  he  meant — as  the  whole  principle 
and  spirit  of  his  teaching  shows — that  private  property  in  land  values 
is  wrong. 

"It    is    sometimes    said    that    if    landowners    can    rightfully    claim   Present  con- 
ownership  they  are  entitled  to  all  the  ground  rent;  that  the  common   ception  of 
right  to  land  and  the  common  right  to  ground  rent  go  together.     How   private  owner- 
can  this  be  true,  when  even  under  the  land  tenure  of  to-day,  which  is  ship  of 
that  of  ownership,  no  one  claims  that  the  landowners,  as  for  example,   land  admits 
those  of  the  city  of   Boston,  are  entitled  to  all  the  ground  r'ent,  but   the  right  to 
only  to  that  part  which  is  not  taken  in  taxation.    Their  own  claim  falls   tax  land 
short  of  'all'  by  the  $10,000,000  now  yielded  up  in  taxation.     In  case   values. 
the  demands  of  taxation  should  be  twice  as  great,  would  they  be  any 
more  than  now  entitled  to  'all'?     It  is  not  easy  to  see  how  ownership 
can  carry  with  it  as  a  necessary  consequence  the  private  appropriation 
of  ground  rent,  because  while  there  has  never  been  a  denial,  there  has 
always  been  a  recognition,  of  the  sovereign  power  and  right  to  tax  the 
land. 

"Private  ownership  of  land  is  no  injustice  to  anybody  to-day,  nor   Not  private 
has  it  been  at  any  time.     The  untaxed  private  ownership  of  land  value   ownership 
as  it  exists  to-day  is  unjust.     This  does  not  mean  that  the  ownership   but  untaxed 
is   unjust,   but  that  not  to  tax  it  is   unjust.      An   absolute  ownership   private 
in   land,  such   as   Henry   George  recognizes   in  the  products  of   labor1,   ownership 
would  be   unjust,   but,  says  Mr.   Edward  Atkinson,  no   such   ^absolute   of  land  is 
ownership  of  land  is  recognized  in  the  law  books.'    Its  tenure  is  always   unjust. 
subject    to    taxation,    and    to    the    superior    right    of    eminent    domain. 
Feudal  tenure  would  seem  to  have  been  a  rude  recognition  of  the  prin- 
ciple that  the  beneficiaries  of  a  government  should  pay  the  expenses  of 
government." 

Even  more  important  than  the  fact  that  land  values  in  a  city  are  Clty  iwprove- 

created  partly  by  the  growth  of  the  population  is  the  fact  that  they  ments  whtch 
•        ,  ,  ..  ,  ,.     .  increase  land 

are  also  due  to  the  expenditures  by  the  city  for  public  improvements,  miues  are 

such  as  sewers,  schools,  streets,  sidewalks,  transit,  parks,  etc.    The  paid  for  by 
provision  of  these  essentials  to  the  development  of  any  community   taxes  on  those 

17 


who  do  not 
participate  in 
these  values. 


Prof.  E.  R.  A. 
Seligman 
admits  that 
much  of  city 
taxes  is  borne 
by  those  least 
able  to  pay. 


The  result  of 
taxing  land 
values  and 
buildings  at 
the  same  rate 
proves  it 
immoral. 

New  York 
City  Com- 
mission on 
Congestion 
find  equal  tax 
rate  on  land 
and  buildings 
discourages  the 
construction 


is  met  by  taxes  upon  the  users  of  land  and  buildings  and  paid 
for  by  them.  The  owners  of  property  expect  and  demand  a  net 
return  upon  the  cost  of  property,  over  and  above  all  the  taxes 
which  they  ostensibly  pay.  They  generally  get  this,  and  to  the 
extent  this  is  so  they  shift  the  taxes,  i.  e.,  the  cost  of  city  govern- 
ment, upon  the  users  of  land  (in  exceptional  cases)  and  always  of 
buildings,  that  is  the  tenants.  Admittedly  the  tax  on  land  cannot 
be  shifted  upon  the  tenants  unless  there  is  very  great  demand  for  its 
use.  This  is  sometimes  the  case,  however,  in  the  center  of  a  large 
city,  especially  when  the  tax-rate  upon  land  is  low.  As  Prof.  E.  R. 
A.  Seligman  states  in  his  "Incidence  of  Taxation,"  "While  the  real 
estate  tax  falls  upon  the  owner  in  case  of  stationary  or  declining 
population,  a  considerable  proportion  of  the  tax  is  shifted  on  the 
tenant  in  the  normal  case  of  prosperous  town  or  city  districts  under 
the  present  administration  of  our  property  tax.  When  we  reflect 
that  in  the  city  of  New  York  over  three-quarters  of  the  population 
live  in  tenement  houses,  we  are  thus  forced  to  the  conclusion  that 
a  large  burden  of  our  American  local  taxation  is  to-day  borne  by 
those  least  able  to  pay." 

Assuming,  however,  that  only  the  part  of  the  tax  which  falls  on 
buildings  or  improvements  of  any  kind  is  shifted  on  to  the  tenants, 
even  so  this  tax  alone  amounts  to  from  $10  to  $30  a  year  or  more, 
which  every  family  in  a  city  has  to  pay  for  the  use  of  a  building 
toward  the  expenses  of  city  government.  This  is  a  burden  upon 
the  poorer  classes  of  a  community  which  even  if  it  could  be  justi- 
fied from  an  economic  point  of  view  would  not  be  justifiable  morally. 

In  seeking  too,  the  moral  sanction  for  the  taxation  of  land  val- 
ues, we  should  inquire  what  has  been  the  result  of  failure  to  tax 
land  values  adequately,  or  in  other  words  exempting  them  from 
fair  taxation,  by  loading  upon  buildings  and  industry  more  of  the 
necessary  cost  of  government.  Among  the  causes  of  congestion 
of  population,  the  New  York  City  Commission  on  Congestion  of 
Population  refer  to  the  present  method  of  taxing  land  and  buildings. 

"In  New  York  City  until  very  recently  the  owner  of  land  improved 
with  buildings  has  been  penalized,  while  the  man  who  holds  the  land 
out  of  use  so  that  he  may  secure  the  speculative  increase  of  land  values 
has  been  helped  by  the  taxation  policy  of  the  city,  since  unimproved 
land  has  been  assessed  at  a  relatively  low  value,  while  the  rate  on  land 
and  buildings  has  been  the  same.  The  system  of  taxation  has  dis- 
couraged the  construction  of  tenements,  of  factories  and  all  other 
buildings  until  the  growth  of  the  city's  projected  improvement  has 
given  to  land  the  capitalized  congestion  value,  to  which  reference  has 
been  made,  and  has  enabled  the  owners  of  land  to  reap  fortunes  from 

18 


values  created  largely  by  the  increase  of  population.     This   policy  is  of  buildings 
putting    a    premium    upon    congestion    and   is    in    appreciable   measure   and  encour- 
responsible  for  the  holding  of  land  out  of  use  for  a  much  longer  period  ages  land 
than  it  would  be  so  withheld  if  a  large  share  of  the  increase  of  land  speculation. 
values  by  the  community  were  recovered  by  them  for  community  needs." 

Almost  everyone — except  a  very  few  landowners — agrees  that  Intolerable 
the    conditions  of  room  overcrowding  and  congestion  per  acre  in  congestion  and 
New  York  City  are  indeed,  as  Governor  Hughes  described  them,  room  over: 
"intolerable,"  and  his  characterization  of  such  conditions  is  applica-  ** 

ble  to  other  cities  of  the  country  as  well.  cities. 

Mr.  Allan  Robinson,  President  of  the  Allied  Real  Estate  Inter- 
ests of  New  York,  a  member  of  the  City  Congestion  Commission, 
in  a  recent  address  gave  his  estimate  of  the  owners  of  land  who 
will  not  improve  it  in  vigorous  language. 

"I  hold  no  brief  for  the  man  who  owns  land  he  will  not  improve.  President  of 

Worse  than  the  miser  who  hoards  his  gold  and  thus  keeps  it  from  cir-  Allied  Real 

culation,  more  culpable  than  the  capitalist  who  spends  his  wealth  for  Estate  Interests 

his  own  pleasure  is  the  landowner  who,  for  distant  profit,  withholds  of  New  York 

from   use   land  that  the   exigencies   of   the    community   require.     The  says  the  man 

corroding  cares,  ill  health,  stunted  growth,  and  inequality  of  opportu-  who  for  distant 

nity  which  haunt  the  habitations  of  the  poor  in  our  cities  may  well  be  profit  with- 

laid  at  his  door,  and  I  shall  make  no  effort  to  relieve  him  of  respon-  holds  from  use 

sibility  which  his  ownership  has  entailed  upon  him  and  which  he  has  land  needed 

been  unwilling  to  assume.      Ownership  of  land  carries  with  it  corre-  is  worse  than 

spending  burdens.  The  welfare  of  the  race  may  be  jeopardized  through  the  miser. 
the  selfish  policy  of  landowners.  The  voters  of  the  future  are  the 
children  of  to-day.  Take  from  them  what  they  now  need  for  normal 
growth  and  development  and  when  they  reach  man's  estate  they  will 
take  from  you  or  your  children  all  that  land  which  you  are  now 
withholding  from  them." 

The  morality  of  taxing  land  values  somewhat  is,  however,  not 
questioned  even  by  those  who  oppose  the  proposal  to  tax  them  suf- 
ficiently to  take  the  burden  off  industry  whether  it  be  the  industry 
of  the  man  who  constructs  buildings  or  who  manufactures  or  who 
toils  with  his  hands.   Mr.  Allan  Robinson,  quoted  above,  remarks, 
"Land  is  an  'easy  mark'  to  use  a  slang  expression.    It  is  the  pack- 
horse  that  carries  most  of  our  burdens;  and  because  it  has  shown 
a  disposition  to  take  the  major  part  it  is  now  proposed  to  load  it 
with  all  of  them."    This  expresses  the  case  for  the  taxation  of  land  Land  is  not  an 
values  properly  because  the  "packhorse"  is  purchased  and  fed  by  easy>  bu*  a 
those  who  propose  to  put  upon  it  the  burdens  which  it  alone  can  just  mark  f°r 
best  bear  without  any  injustice.    Land  is  different  in  its  nature  from 
any  other  object  of  taxation,  since  its  value  is  due  to  the  work  and 
expenditure  of  others.    The  fundamental  morality  of  the  taxation 

19 


No  one  is 
entitled  to 
values  he  has 
not  created, 
nor  to  reap 
benefits  of 
others'  toil. 


Is  it  right  to 
diminish 
anticipated 
returns  from 
investment  in 
land? 


It  is  fallacious 
to  expect 
government 
to  guarantee 
any  unearned 
profits. 


of  land  values  is  the  fact  that  no  one  is  entitled  to  benefit  by  the 
exertion  and  efforts  of  others,  as  the  owners  of  land  do,  without 
giving  a  quid  pro  quo  that  is  returning  something  adequate  for  value 
received.  The  reason  that  the  owner  of  land  is  not  entitled  to  the 
same  net  return  upon  his  investment  in  land  as  upon  his  investment 
in  buildings,  manufacturing  plant,  stock  of  goods,  etc.,  is  that  land 
values  are  a  social  product,  while  the  others  are  not  in  the  same 
sense  because  land  in  a  city  has  a  unique  value  since  the  supply  is 
limited  and  it  cannot  be  increased,  and  one  can  manufacture  or  open 
a  store  in  almost  any  city  of  the  country  while  a  man  must  live 
within  a  certain  distance  of  his  work.  The  very  presence  of  a  fac- 
tory and  store  creates  land  values. 

"While  it  may  be  proper,  however,"  the  opponents  of  taxing  land 
values  claim,  "to  tax  cheap  land  at  a  higher  rate  of  taxation,  or 
land  in  a  new  community,  a  person  who  has  invested  money  in 
land  whether  improved  or  not  expecting  a  certain  net  return  upon 
his  investment  is  entitled  to  such  net  return,  and  any  legislation 
which  would  reduce  this  anticipated  return  is  contrary  to  the  Four- 
teenth Amendment  in  upsetting  the  basis  upon  which  the  contract 
was  made,  and  deprives  the  owner  of  his  property  without  com- 
pensation or  due  process  of  law  and  is  to  this  extent  unmoral,  not 
to  say  immoral." 

The  fallacy  underlying  this  argument  is  that  government  should 
guarantee  or  undertake  to  guarantee  any  fixed  return,  or  to  re- 
frain from  any  legislation  or  action  which  might  impair  or  alter 
conditions  existing  at  the  time  of  purchase  of  land.  The  same 
argument  can  be  advanced  against  any  tariff  reduction,  because  a 
manufacturer  of  a  highly  protected  article  has  invested  money  in 
his  plant,  which  with  the  continuance  of  this  tariff  would  yield  large 
returns,  but  which  might  either  yield  a  small  return  or  entail  a  loss 
if  the  tariff  were  abolished.  So  too,  an  unnecessary  improvement 
is  often  promised  by  an  administration  to  a  certain  section  of  a 
city,  and  the  owners  of  land  discount  its  achievement  and  sell  their 
land  in  this  section  at  a  large  advance.  This,  however,  does  not 
constitute  any  valid  reason  why  the  city  should  make  such  a  gift 
to  the  owners  of  land  in  any  section  of  a  city.  "Whatsoever  a  man 
soweth,  that  shall  he  also  reap"  enunciates  sound  economic  doctrine, 
frequently  overlooked  by  get-rich-quick  land  schemers,  whose  pro- 
moters neglect  the  converse  of  this  statement  that  no  man  is  entitled 
to  reap  where  he  has  not  sown,  nor  to  secure  the  values  which  others 
have  created. 


20 


Naturally,  however,  a  heavier  taxation  of  land  values  permits 
the  lower  taxation  of  buildings,  machinery  and  all  property  which 

represents  industry.     The  owner  of  a  factory  which  is  an  adequate  Heamer  ta*a~ 

.    ,  *     .  J  .„  ,  *  tion  of  land 

or  suitable  improvement,  will  be  required  to  pay  less  taxes  with  the  vaiues  ^  \^e 

proper  taxation  of  land  values,  and  this  will  properly  encourage  virtue,  its  own 
the  construction  of  such  buildings.  reward  in 

In  his  speech  on  the  People's  Budget,  Mr.  Lloyd-George  quotes  a  Permitting 
conservative  member's  statement  about  the  increases  of  land  values,     ?Wfr-fj**J 
and  rentals  and  states  his  justification  of  taxing  the  urban  landlord 
as  follows: 

"In  the  parish  of   Plumstead  land  used  to  be  let  for  agricultural   Mr.  Lloyd- 
purposes  for  £3  an  acre.    The  income  of  an  estate  of  250  acres  in  1845   George 
was  £750  per  annum,  and  the  capital  value  at  twenty  years'  purchase    instances 
was  £15,000.     The  Arsenal  came  to  Woolwich;   with  the  Arsenal  the   increases  in 
necessity  for  5,000  houses.     And  then  came  the  harvest  for  the  land-   land  values  in 
lord.     The   land,   the   capital   value   of   which   had   been    £15,000,   now  England. 
brought   an   income  of   £4,250  per   annum.     The  ground   landlord  has 
received   £1,000,000   in   ground   rents    already,   and   after   twenty  years 
hence  the  Woolwich  estates,  with  all  the  houses  upon  them,  will  revert 
to  the  landowner's  family,  bringing  another  million,  meaning  altogether 
a  swap  of  £15,000  for  a  sum  of  £2,000,000. 

"There  are  many  cases  of  a  similar  character  which  will  readily 
occur  to  the  memory  of  every  hon.  member  who  is  at  all  acquainted 
with  the  subject.  Take  well-known  properties  in  Lancashire  and 
Cheshire  in  regard  to  which  evidence  was  given. 

"And  yet,  although  the  landlord,  without  any  exertion  of  his  own,  Mr.  Lloyd- 
is  now  in  these  cases  in  receipt  of  an  income  which  is  ten  or  even  a   George 
hundred-fold  of  what  he  was  in  the  habit  of  receiving  when  these  prop-   shows  how  the 
erties  were  purely  agricultural  in  their  character,  and  although  he  is   "slumbering 
in  addition  to  that  released  from  the  heavy  financial  obligations  which   landlord" 
are  attached  to  the  ownership  of  this  land  as  agricultural  property,  he   described  by 
does  not  contribute  a  penny  out  of  his  income  towards  the  local  expen-   Mill  gets  land 
diture  of  the  community  which  has  thus  made  his  wealth,  in  the  words   values. 
of  John  Stuart  Mill,  'whilst  he  was  slumbering.'     Is  it  too  much,  is  it 
unfair,  is  it  inequitable,  that  Parliament  should  demand  a  special  con- 
tribution   from    these    fortunate   owner's   towards    the    defence   of   the 
country   and   the   social   needs   of   the   unfortunate   in    the   community, 
whose  efforts  have  so  materially  contributed  to  the  opulence  which  they 
are  enjoying?" 

Mr.   Fillebrown   gives   some  typical   instances  of   increases   in 
assessed  land  values  in  Boston.     The  assessed  land  value  of  one 
and  eight-tenths  acres  on  Winter  street,  Boston,  between  Tremont  jnstances  Of 
and  Washington  streets  was  in  1898,  $5,142,600.     In  1907,  it  was  increases  in 
$8,272,000  or  an  increase  in  nine  years  of  $3,129,400,  or  57  per  cent,   land  values 
The  assessed  valuation  of  this  property  of  $275  per  square  foot  was,  in  Boston. 
he  states,  the  highest  in  Boston : 

21 


Instances  of 
increases  in 
land  values 
in  Chicago. 


Some  increases 
in  land  values 
in  Pittsburgh. 


Increases  in 
land  values  and 
profits  in  land 
in  New  York. 


Large  increases 
in  land  values 
common  in 
American 
cities. 


"The  assessed  valuation  of  Washington  Street,  from  Adams  Square 
to  Eliot  Street,  3,495  feet,  or  two-thirds  of  a  mile  in  length,  with  an 
area  of  745,003  square  feet,  171/10  acres,  comprising  179  estates,  was 
in  1907: 

Land    $61,135,900        $77.00  per  square  foot 

Buildings  10,793,200          13.50  per  square  foot 

"This  is  an  increase  in  valuation,  over  the  year  1898,  of  land, 
$20,438,400,  or  50  per  cent;  of  buildings,  $1,955,100,  or  20  per  cent.  In 
1899  the  valuation  of  the  buildings  was  21  */2  per  cent  that  of  the  land; 
in  1907,  only  17%  per  cent." 

The  following  cases  of  increases  in  land  values  in  Chicago  show 
typical  increments  in  crowded  sections  of  that  city: 

Assessed  Land  Increase  from 
Values.  1903  to  1907. 
1903.               1907.  Amount.  Per  Cent. 
Marshall    Field,    Retail    De- 
partment Store   $4,715,200      $6,006,025  $1,290,825        27.37 

Siegel,    Cooper    &    Co.    De- 
partment Store   2,040,000        3,145,660  1,105,660        54.21 

Congress  Hotel  1,297,800        2,313,780  1,015,987        78.28 

Republic  Office  Building 1,155,600        1,799,000  643,400        55.67 

Stratford  Hotel   (c) 642,575        1,656,500  1,013,925      15/78 

(c)  Sale  1899,  $640,000. 

The  property  at  No.  311  Fourth  Aveuue,  Pittsburgh,  was  sold  in 
1884  for  $30,000,  and  was  worth  in  1908  $400,000  an  increase  in 
about  a  quarter  of  a  century  of  1,333  per  cent. 

Similarly  the  site  of  the  Schmidt  Hamilton  Building  in  Pitts- 
burgh was  worth  per  front  foot  in  1884  $3,500,  in  1908  $15,000 — 
an  increase  of  429  per  cent. 

The  following  statements  have  appeared  recently  in  New  York 
papers : 

"A  Lot  on  the  east  side  of  Tenth  Avenue,  between  2o6th  and 
2O7th  streets  sold  in  1904  for  $1,100,  and  last  year  (1910)  the  same 
property  brought  $12,600." 

"Six  years  ago  the  lots  sold  for  $1,600  each.  The  present  selling 
price  is  $9,000  apiece.  This  is  an  increase  of  nearly  600  per  cent 
since  1905." 

"In  active  markets  I  have  made  for  myself  and  my  friends  500 
per  cent  per  year." 

"Our  profits  for  four  years  were  fully  250  per  cent  per  annum." 

Similar  percentages  of  increase  in  value  of  land  and  profits 
therefrom  can  be  duplicated  in  nearly  every  American  city,  and 
while  allowance  should  be  made  for  inflation  of  land  values,  and 
"land  booms,"  the  salient  fact  remains  that  the  natural  increase  of 


22 


population  creates  increased  land  values,  and  that  in  addition  to 
these  increases  the  land  could  if  properly  utilized  or  improved  have 
yielded  a  good  net  return. 

The  bona  fide  land  values  of  New  York  City  for  example,  ex-  General 

elusive  of  expenditures  by  the  owners  or  assessments  by  the  city  tncrfasef  °f 

,Hr>  .  t       t  mm   *   land  values  in 

increase  about  $800  a  year  for  every  person  who  has  been  added  New  York 

to  the  population.  The  mere  fact  that  New  York  City  like  many 
American  cities  has  relied  upon  immigration  to  increase  its  popula- 
tion and  hence  its  land  values  does  not  mean  that  restriction  on  im- 
migration would  mean  a  cessation  of  the  increase  in  land  values. 
A  lower  death  rate  and  a  higher  birth  rate  are  just  as  potent  means 
of  increasing  population,  and  hence  land  values,  as  immigration, 
and  one  can  claim  without  being  regarded  as  a  sentimentalist  that 
it  is  a  much  more  humane  method.  Each  day's  labor  of  New  York 
City's  population  including  the  Sunday  of  rest  for  the  next  week's 
work  increases  the  city's  land  values  by  about  $300,000. 

Certainly  on  no  moral  grounds  can  the  right  of  creators  of  land   There  is  no 
values  to  participate  in  the  values  they  create  be  denied.     Hitherto  moral  basis 
they  have  been  denied  fair  participation,  because  selfish  interests  f°r  objecting 
have  controlled  legislation,  and  the  people  have  not  been  able  to  ^a^'L 
enact  their  own  convictions  and  wishes  into  law.  jand  va]ues 

Mr.    Allan   Robinson   has    frankly   admitted   that   if   the   pro- 
posal to  make  the  rate  of  taxation  on  all  buildings  and  personal   The  sober, 
property  in  New  York  City,  one-half  the  rate  of  taxation  on  all  land  conservative 

were  submitted  by  referendum  to  the  people  of  the  city,  it  would  be  I"d9™en*  °f 
rr,,          .  .     t  e  ,,       A         .     the  American 

adopted  at  once.    The  sober  conservative  judgment  of  the  Amen-  peop^e  ^ 

can  people  is  opposed  to  the  continuation  of  special  privilege,  how-  Opposed  /0 
ever  granted.    This  judgment  believes  that  men,  women  and  chil-  special  privi- 
dren  are  entitled  to  the  values  which  they  produce,  and  that  no  one  lese  such  as 

is  entitled  to  anything  wrested — even  with  legal  sanction  at  pres-  underta*ed 

-       J  ownership 

ent ,-f  rom  them.  of  Jand 

The  progressive  rate  of  taxation  on  inheritances  for  state  pur- 
poses adopted  by  many  states  and  the  progressive  income  tax  now 
under  consideration  for  securing  revenue  for  the  Federal  govern- 
ment are  based  upon  the  same  fundamental  principles  of  justice 
which  underlie  the  demand  for  the  taxation  of  land  values  for  the 
relief  of  industry,  and  the  termination  of  other  special  privileges. 
Neither  the  taxation  of  incomes  derived  from  mines  in  which  immi- 
grants have  lost  their  lives  from  accidents  and  low  wages,  the  taking 
by  an  inheritance  tax  of  the  entire  wealth  derived  from  unsanitary 
tenements  and  underpaid  workers,  nor  levying  upon  land  the  cost 
of  government  to  protect  the  lives  and  to  educate  the  people  who 

23 


Taxation  is 
one  of  democ- 
racy's surest 
methods  of 
restoring  and 
securing  social 
justice. 


The  Federa- 
tion of 
Churches  in 
New  York  City 
endorses 
halving  the 
tax-rate  on 
buildings. 


give  to  land  its  value  will,  however,  restore  to  life  or  health  those 
who  have  died  or  lost  their  health  through  government's  failure  to 
establish  and  enforce  safe  and  healthy  conditions  of  living  in  the 
past.  Nevertheless,  in  American  cities  just  and  economically  sound 
taxation  still  is  one  of  democracy's  surest  methods  of  restoring  and 
securing  social  justice.  Because  the  heavy  taxation  of  land  values 
is  the  soundest  and  most  just  method  of  taxation  it  is  the  most 
moral  method  of  taxation  for  municipal  purposes. 

The  Federation  of  Churches  and  Christian  Organizations  in 
New  York  City  in  advocating  the  halving  of  the  tax-rate  on  build- 
ings states : 

"In  the  minds  of  many  this  bill  is  an  application  of  the  'Gospel 
according  to  George.'  This  is  only  partially  true,  inasmuch  as  Henry 
George  advocated  the  abolition  of  all  taxes  except  taxes  on  land,  and 
this  bill  does  not  do  that.  The  Federation  regards  the  bill  as  the  most 
important  piece  of  social  legislation  introduced  at  Albany  in  the  last 
twenty-five  years,  not  even  excepting  the  race-track  gambling  measures. 

"It  is  a  bill  in  the  interest  of  the  proper  housing  of  the  people  of 
New  York.  The  Federation  has  proved  by  its  publications  that  New 
York,  in  1940,  will  have  less  than  10,000,000  people.  That  is  to  say,  the 
people  of  New  York  a  generation  from  now  could  be  housed  on  its 
area  at  an  average  of  less  than  60  people  per  acre,  whereas  Manhattan 
Island  has  166  people  per  acre,  with  districts  running  as  high  as  731 
per  acre,  and  individual  blocks  as  high  as  1,674  Per  acre,  while  Bfook- 
lyn  has  wards  running  over  300  per  acre,  and  31.9  per  cent  of  the 
Bronx's  population  is  housed  at  an  average  density  above  the  average 
density  of  Manhattan.  From  July,  1902,  to  December  31,  1908,  62  per 
cent  of  the  dwellings  erected  in  the  Bronx  were  five  stories  or  over. 

"Tenement  House  Reform'  as  a  rallying  cry  for  housing  move- 
ments in  New  York  should  give  place  to  'Tenement  House  Prevention,' 
and  speculative  landowners,  who  are  opposing  this  bill,  which  penalizes 
the  non-use  of  land,  by  placing  a  larger  measure  of  the  carrying  charges 
of  the  city  budget  upon  it,  and  rewards  the  building  of  homes  for  the 
people  by  exempting  them,  in  1912,  10  per  cent  of  their  value,  and 
adding  10  per  cent  exemption  per  annum  till,  in  1907,  50  per  cent 
exemption  is  granted,  should  be  routed  by  the  combined  force  of  the 
churches  and  laboring  people  of  New  York.  If  the  tenement  many 
stories  high  is  to  house  the  people  of  New  York  of  the  future,  every 
church  will,  in  time,  be  compelled  to  become  an  'institutional  church.' 
The  churches  should  be  willing  to  assume  this  form  of  social  service 
if  they  are  compelled  to,  but  it  would  be  better  if  they  should  become 
Vestitutional  churches,'  and  so  compel  the  use  of  the  livable  area  of 
New  York  as  to  restore  the  single,  the  two- family  and  three- family 
dwelling  as  the  normal  type  of  housing.  Rapid  transit  should  not  be 
allowed  to  enrich  a  few  land  speculators,  but  should  be  so  developed 
as  to  distribute  the  population  of  New  York  throughout  its  whole 
livable  area." 


CHAPTER  III. 

Results  of  Taxing  Buildings  at  the  Same  Rate 

as  Land 

John  Stuart  Mill's  dictum,  "That  is  the  best  kind  of  government  Good  govern- 
which  makes  it  as  hard  as  possible  for  a  man  to  do  wrong,  and  as  ment 
easy  as  possible  for  him  to  do  right,"  may  be  applied  to  systems  of  ^ofit 
taxation  and  read,  "That  is  the  best  system  of  taxation  which  en-  wrong  action 
courages  enterprise  and  effort,  and  discourages  sloth,  which  stimu-  unprofitable. 

lates  the  construction  of  healthy  dwellings  and  the  demolition  of   , 

r  .      Taxes  should 

unsanitary  ones,  and  which  not  only  compels  payment  of  taxes  in  be  judged  by 

proportion  to  ability  to  pay,  but  as  well  in  proportion  to  services   their  moral 
rendered."  re™lts- 

The  incidence  of  taxation  is  quite  as  important  as  the  rate  of 
taxation,  and  is  worthy  of  the  careful  consideration  of  those  inter- 
ested in  the  administration  of  cities.  The  social  activities  of  Amer- 
ican cities  are  as  yet  in  their  inception.  In  nearly  every  large  Amer-  Collective 

ican  city  the  expenditures  for  educational  purposes,  the  extermina-  mu™clPal 

•  «•     1    social  activi- 

tiori  of  tuberculosis,  inspection  of  milk  and  other  food,  medical  ties  st^  jn 

treatment  of  school  children  whose  parents  are  too  poor  to  provide  their 
such  treatment  for  them,  parks  and  playgrounds,  etc.,  are  constantly  beginnings. 
increasing,  as  we  as  a  nation  are  conceiving  and  carrying  out  the 
duty  and  economy  of  collective  municipal  action. 

In  1908,  the  one  hundred  and  fifty-eight  cities  in  the  country 
having  a  population  of  30,000  or  over,  out  of  total  payments  for 
general  expenses  and  special  service  expenses  amounting  to  $402,- 
633,976,  expended  over  one-fourth,  $102,723,553  for  protection  of 
life  and  property,  and  $40,055,559,  or  about  one-tenth,  for  health 
conservation  and  sanitation ;  $28,006,783  for  charities,  hospitals  and 
corrections,  and  $119,004,725,  nearly  one-third,  for  education.  De-  Many 

spite  these  facts  we  have  in  our  cities  abnormal  fire  losses,  and  mumat>a 

expenditures 
inadequate  police  protection,  death  rates  are  cruelly  and  criminally  mereiy  "iock 

high,  jails  and  reformatory  institutions  are  disgracefully  crowded,   the  door  after 
and  school  buildings  are  unsanitary,  classes  are  too  large,  and  teach-  the  mule  is 
ers  are  grievously  underpaid.    The  sweeping  claims  made  as   to  stolen." 
waste  which  can  be  eliminated  gave  promise  of  material  reduction 
in  municipal  expenditures,  but  the  promise  has  not  been  achieved. 

25 


Dominance  of 
real  estate 
owners  in 
budget-voting 
bodies  is  now 
challenged. 

Not  the  tax 
rate,  but  who 
pays  the  taxes, 
the  most 
important 
question. 


Robbing  the 
sick  and  poor 
by  taxation  a 
more  serious 
evil  than  a 
small  waste 
of  funds. 


Legalised  rob- 
bery through 
taxation 
must  stop. 


The  dominant  influence  of  real  estate  owners  over  budget-voting 
bodies  is  at  least  challenged,  however. 

Ability  to  "keep  down  the  tax-rate"  is  no  longer  the  criterion  of 
efficiency.  The  thinking  public  of  American  cities  realizes  that  im- 
portant as  are  economy  and  efficiency  in  administration,  adequate 
appropriations  for  social  needs  are  equally  important.  Of  course, 
the  two  are  not  incompatible,  but  the  people  of  American  cities 
while  desiring  strictest  economy  do  not  wish  adequate  provision 
for  the  city's  social  needs  to  await  perfection  in  the  organization  and 
administration  of  all  the  city's  departments.  Efficiency  in  admin- 
istration has  outstripped  efficiency  in  scope  of  municipal  activities. 
The  questions  who  pays  the  taxes,  and  whether  those  who  do  pay, 
are  able  to  pay,  are  demanding  as  much  attention  as  whether  5% 
or  even  10%  of  public  funds  is  wasted  and  this  charge  is  more 
easily  made  than  proven.  A  waste  of  5%  even  of  the  city's  expen- 
ditures, which  should  be  stopped,  is,  nevertheless,  not  so  serious  an 
evil  as  taking  $10  to  $50  in  taxes,  a  year,  from  scores  of  thousands 
of  farniles  in  the  city  who  are  not  able  to  pay  even  a  dollar  toward 
the  expenses  of  the  city.  A  certain  sum  of  money  is  required  in 
every  city  to  enable  a  family,  even  making  allowance  for  the  per- 
sonal equation,  to  maintain  a  standard  of  living  essential  to  national 
efficiency.  The  lower  a  family's  income  is  below  this  minimum  of 
national  efficiency,  the  more  heinous  the  city's  offense  in  extorting 
from  them  by  unjust  systems  of  taxation  even  a  dollar  for  ex- 
penses, and  the  more  costly  the  later  atonement  the  city  must  make 
for  such  a  policy. 

In  times  of  war,  deprivation  of  the  necessities  of  life  may  be 
condoned,  but  the  legalized  robbery  through  taxation  sanctioned  in 
American  cities  to-day  by  inert  or  unthinking  public  opinion  is 
unparalleled  since  the  days  of  the  Duke  of  Alva  in  the  Netherlands. 
We  rob  widows,  consumptives,  and  children  because  we  do  not  tax 
land  values  adequately.  We  fetter  industry  and  condone  low  wages 
because  the  owner  of  ground  rent — the  landowner — is  permitted  to 
tax  the  industrious  users  of  land. 

Before  examining  in  detail  the  economic,  fiscal  and  social  aspects 
of  taxing  land  values,  we  may  profitably  study  the  incidence  of 
present  methods  of  taxation  in  American  cities. 

Of  the  total  receipts  in  1908  of  $479,834,806  from  general  rev- 
enues in  the  one  hundred  and  fifty-eight  cities  in  the  country  having 
a  population  of  over  30,000,  $393,940,142  was  derived  from  taxes. 
Of  this  amount  $377,340,940  was  the  original  levy  upon  general 
property,  and  $2,643,309  penalties  upon  such  property,  while 

26 


$12,686,929  was  derived  from  special  property  and  business  taxes,  About  three- 

and  $1,268,904  from  poll  taxes,  $50,435,297  was  derived  from  licen-  Quarters  of 

ses  and  permits,  $3,893,719  from  fines  and  forfeits  and  $31,545.785  ^eT^ith 

from  subventions,  grants  and  gifts  from  other  civil  divisions — such  over  30floo 

as  school  funds  from  the  state — and  from  private  individuals.  population 

In  other  words  nearly  three-quarters  of  the  total  revenue  of  derived  from 

these  one  hundred  and  fifty-eight  cities  was  derived  from  a  gen-  9eneral  Pr°P~ 

eral  property  tax.    The  tax  on  land  values  was  the  only  tax  that  la*ge  pr*por. 

usually  cannot  be  shifted.    Over  $63,000,000,  about  one-eighth,  was  tion  of  this 

secured  from  taxes  on  special  property  and  business  licenses  and  levied  on 

permits  including  $40,716,637  from  liquor  licenses  and  taxes.  buildings. 

Unfortunately  a  few  cities  only  of  the  total  one  hundred  and 

fifty-eight  separate  land  and  improvement  values  in  their  assess-  ?*"**Jf  upon 

individuals  of 
ments,  so  that  it  is  impossible  to  state  accurately  the  levy  on  each.  tax^ng  &tt,7</_ 

This  is  not  so  important,  however,  as  to  see  the  effect  upon  individ-  ings  0/  same 
ual  renters  which  the  taxation  of  land  and  buildings  at  the  same  rate  as  land. 
rate  would  produce.  American 

The  Federal  Census  for  1900  gives  the  percentage  of  families  cities'  popula- 
tenants    in    some    important    cities    as    follows :    Baltimore,  73.9 ;  tion  largely 
Boston,    81.6;    Buffalo,    60.0;    Chicago,    71.3;    Cincinnati,    80.8;  **»<**** 
Cleveland,    60.9;    Columbus,    67.3;    Detroit,    58.3;     Fall    River, 
82.9;  Jersey  City,  81.2;  Kansas  City,  76.9;  "Los  Angeles,  60.0;  Mil- 
waukee, 57.9;  Newark,  78.0;  New  Haven,  73.3;  Manhattan  and 
the  Bronx,  93.7;   Brooklyn,  81.4;   Omaha,  74.1;   Paterson,   76.0; 
Philadelphia,  77.2;  Pittsburgh,  72.1;  Providence,  79.3;  St.  Louis, 
79.5;  San  Francisco,  78.5;  Washington,  D.  C.,  74.8;  Worcester, 

737- 

The  basis  of  assessment  in  different  cities  also  varies  materially 
from  33  1/3%  of  full  value  in  Chicago  to  nearly  100%  in  New 
York — the  rate  of  taxation  differing  naturally  similarly,  but  the 
effect  in  every  city  of  taxing  the  industry  represented  by  a  house 
or  tenement  at  the  same  rate  as  the  ground  values  created  largely 
by  the  community  and  by  municipal  improvements  so  that  the  taxes 
on  buildings  may  be  shifted  to  the  tenant  and  enrich  the  owner  of 
the  ground  rent — the  landowner — is  shown  in  the  following  illus- 
tration. 

The  taxes  on  a  house  assessed  for  $3,000  with  a  tax-rate  of  Hwh  taxes  on 
$2.00  amounts  to  $60.00.  This  tax  must  be  paid  by  the  tenant  of  the 

««*j«  r    *    •  * 

building  as  part  of  his  rent.  The  taxes  on  an  apartment  assessed 
for  $1,250  at  the  same  tax-rate  amounts  to  $25.00.  It  is  evident  that 
to  secure  funds  for  a  city's  necessary  expenditures  by  an  equal 
rate  of  taxation  on  land  and  buildings  means  that  an  appreciable 

27 


Taxing  build- 
ings lowers 
the  standard  of 
living  and 
creates  paupers. 


New  York  City 
extorts  taxes 
from  scores 
of  thousands  of 
consumptives' 
families  and 
widows. 


Taxing  build- 
ings robs 
families  with 
incomes  below 
the  required 
standard  of 
living. 


amount  is  extorted  from  families,  whether  they  are  able  to  pay  or 
not. 

The  consumptive  under  such  a  system  of  taxation  who  returns 
from  an  effort  to  cure  this  dread  disease,  the  widow  working  for 
a  pittance  to  keep  her  family  together,  the  unskilled  worker  who 
is  striving  to  maintain  his  family  and  bring  them  up  to  efficient 
citizenship,  all  must  pay  their  quota  of  taxes  in  their  rent,  although 
it  means  lessening  the  consumptive's  chance  to  regain  health,  has- 
tens the  day  when  the  widow  must  abandon  the  struggle  to  keep 
her  family  together  and  reduces  the  vitality  of  the  workingman 
and  his  family. 

Illustrations  from  New  York  City  where  rents  are  so  cruelly 
high  will  sufficiently  demonstrate  the  validity  of  this  statement. 
There  are  40,000  known  consumptives  in  New  York  City,  and  prob- 
ably at  least  10,000  more  whose  location  is  unknown,  while  28,000 
new  cases  of  consumption  are  developed  every  year  and  10,000  peo- 
ple a  year  go  to  consumptives'  graves.  Approximately  4,000  wid- 
ows are  supported,  or  to  be  accurate,  helped,  though  not  always 
adequately  supported,  by  private  charities  of  New  York  City.  Some 
23,000  children  are  supported  in  institutions  by  the  city's  appropria- 
tions ;  many  whose  mothers  yearn  to  care  for  them,  but  who  can't 
afford  to  pay  taxes  and  rent  under  our  present  system  of  taxing 
land  and  buildings  at  the  same  rate,  and  in  addition  to  buy  food 
and  clothing,  while  private  charities  also  are  unable  to  keep  the 
homes  of  all  competent  widowed  mothers  intact,  and  the  city  does 
not  give  public  outdoor  relief. 

The  New  York  State  Commission  on  Employers'  Liability,  Un- 
employment and  Lack  of  Farm  Labor  accept  the  report  of  a  com- 
mittee on  the  standard  of  living  of  the  New  York  State  Conference 
of  Charities  and  Correction  in  1907  in  which  they  express  their 
belief  that  with  an  income  of  between  $700  and  $800  a  family  can 
barely  support  itself,  provided  that  it  is  subject  to  no  extraordinary 
expenditures  by  reason  of  sickness,  death  or  other  untoward  cir- 
cumstances. The  Commission  remarks,  "If  unemployment  so  vi- 
tally affects  the  well-being  of  the  skilled  workman  and  his  family, 
its  disastrous  consequences  in  the  household  of  the  unskilled  work- 
man can  be  left  to  the  imagination.  His  income  if  employed  six 
days  every  week  in  the  year  cannot  reach  $550.00,  already  $150.00 
below  the  standard." 

In  point  of  fact  there  are  relatively  few  even  highly  skilled 
operatives  in  New  York  City  who  get  over  $800.00  a  year,  and 

28 


$500.00  to  $700.00  is  the  usual  income  of  an  unskilled  worker  in 
the  city  with  the  exception  of  city  employees. 

Social  workers  and  advocates  of  larger  municipal  expenditures 
may  well  hesitate  under  the  present  system  of  taxation  to  urge  lar-  Larger  muni- 
ger  expenditures  by  the  city,  since  it  means  taking  with  one  mailed  cipal  budgets, 
left  hand  from  all  the  poor  of  the  city  to  give  to  a  few  poor  with 
the     pseudo-charitable    right.     For     more     than     one     reason     a  °means 
city's  right  hand  doesn't  want  to  let  its  left  hand  know  what  it  families  below 
is  doing  in  "charity"  under  present  systems  of  taxation.     This  is   the  standard 
a  qualitative  and  not  merely  a  quantative  injustice.    It  is  not  a  ques-  of  national 
tion  of  whether  there  are  10,000  consumptives  in  Chicago,  or  50,000,   ******* 
20,000  or  30,000  families  in  Philadelphia  who  receive  at  least  $100.00 
less  a  year  than  they  need  to  attain  and  maintain  efficient  manhood   The  injustice 
and  womanhood  and  productivity.     In  every  one  of  the  one  hun-  of  taxing 
dred  and  fifty-eight  cities  to  whose  receipts  and  expenditures  ref-  ^  j"?*n 
erence  has  been  made,  there  are  many  consumptives,  many  widows  upon  the 
and  many,  too  many,  families  below  an  honest  line  of  dependence,   number  of  con- 
and  trying  to  exist  on  deficits.     Nor  will  any  informed  citizen  in  sumptives, 
any  city  of  over  8,000  population  in  the  United  States,  except  those  widows  and 
charming  suburban  places  to  which  the  wealthy  retire  to  get  away  It.  t-       *   ( 
from  the  results  of  present  economic  conditions,  claim  that  there   dependence. 
is  no  irremediable  poverty  in  his  city.     Of  course,  the  income  re- 
quired to  maintain  a  reasonable  standard  of  living  is  less  in  most 
cities  than  in  New  York,  but  the  salient  fact  remains  that  every  in- 
crease of  IOC  in  the  tax-rate  per  $100.00  of  assessed  value  means  that 
the  tenant  of  a  tenement  house  apartment,  assessed  for  $1,250  will 
pay  $1.25  more  taxes,  the  owner  of  a  building  assessed   for  $2,000  No  city  can 
struggling  to  make  both  ends  meet  will  pay  $2.00  a  year  more  taxes  justly  take 
on  his  building,  while  a  general  tax-rate  of  $2.00  per    $100.00  of  taxes.  out  °f  a 
assessed  value  means  that  the  tenant  of  such  an  apartment  must  pay   J,      '™ 
$25.00  in  taxes  in  addition  to  a  net  profit  to  the  landowner — $25.00 
taken  from  a  deficit  of  $100.00  to  $200.00  a  year,  however,  is  an 
injustice  which  no  city  should  inflict  upon  its  citizens. 

A  further  economic  result  of  taxing  buildings  at  the  same  rate 
as  land  has  been  referred  to  in  the  findings  of  the  New  York  City 
Commission  on  Congestion  of  Population — that  owners  of  vacant 
land  are  thereby  encouraged  to  hold  land  out  of  use  to  secure  the 
increase  in  values  and  to  discourage  the  construction  of  buildings 
since  the  owner  is  penalized  in  heavier  taxes  for  construct- 
ing new  buildings  or  replacing  old  and  unsanitary  buildings  with 
new  and  healthy  ones.  This  subject  is  more  fully  dealt  with  in  the 
chapter  on  "Taxation  of  Land  Values  and  Housing  Reform." 

29 


Is  the  land- 
owner entitled 
to  more  than 
2%  ground 
rent,  the 
interest  paid  on 
Postal  Sav- 
ings Bank 
accounts? 

Taxing  build- 
ings at  the 
same  rate  as 
land  cripples 
industry 
and  tends  to 
reduce  wages. 


Taxing  build- 
ings at  the 
same  rate  as 
land  puts  a 
premium  on 
firetraps. 


Under  the  present  general  system  of  taxing  land  and  buildings  at  the 
same  rate,  the  owner  of  ground  rents  feels  entitled  to  and  attempts 
to  secure  $%  to  6%  net  return  on  investment  in  the  land  and  build- 
ings alike.  This  tends  to  keep  up  rents  since  it  is  to  the  advan- 
tage of  the  owners  of  lightly  taxed  land  to  postpone  adequate  im- 
provements thereof  for  as  long  a  time  as  possible  so  as  to  get 
scarcity  value  rents,  and  to  secure  the  maximum  share  of  increas- 
ing ground  rents.  This  applies,  of  course,  to  land  which  should  be 
improved  for  business,  manufacturing  and  commercial  as  well  as 
residence  and  tenement  purposes.  The  inevitable  result  is  high 
rents,  and  a  tendency  to  overcrowd  all  buildings  and  not  to  pro- 
vide proper  standards  of  sunlight,  space  and  ventilation.  Continu- 
ing the  illustration  we  have  used  of  an  apartment  assessed  for  $i,- 
250.00  with  a  proportionate  site  value  of  $750.00,  we  find  that 
a  net  return  of  6%  on  such  property  above  interest,  depreciation, 
vacancy  charges,  etc.,  and  taxes  means  a  ground  rental  of  $45.00  and 
a  profit  on  the  tenement  apartment  of  $75.00  or  a  total  net  profit  of 
$|I2O.OO.  If,  however,  we  are  agreed  that,  say  2%  on  the  land  value, 
i.  e.,  2%  ground  rent,  is  all  that  the  owner  of  ground  rent  is  really 
entitled  to,  then  $30.00  a  year  of  ground  rental  is  extorted  from  the 
tenant  of  such  property,  an  appreciable  sum  for  a  man  with  an 
income  of  $500  a  year,  or  less.* 

Six  per  cent  net  return  on  a  factory  building  assessed  for  $80,- 

000,  on  land  assessed  for  $30,000 — a  total  of  $110,000 — is  $6,600 
of  which  $1,800.00  is  ground  rent.  If,  as  in  the  former  instance,  the 
owner  of  the  land  is  in  fact  entitled  to  only  2  per  cent  net  return, 

1.  e.,  2  per  cent  ground  rent,  then  $1,200.00  is  extorted  from  the 
manufacturer  in  ground  rent  by  the  landowner.   This  sum  distribu- 
ted in  increased  wages  to  two  hundred  employees  would  afford  an 
appreciable  increase  of  wages  amounting  to  from  i  per  cent  to  2 
per  cent  of  the  total  wages  paid  many  employees  in  factories.    Per- 
mitting the  landowner,  however,  to  secure  the  additional  ground 
rent  puts  a  heavy  burden  upon  the  manufacturer. 

The  equal  tax-rate  upon  land  and  buildings  is  a  serious  handi- 
cap to  the  provision  of  fire  protection.  The  tragedy  of  the  recent 
factory  fires  in  Newark  and  in  New  York  City  has  shown  the  ne- 
cessity of  better  construction  of  factory  buildings,  and  the  making 

*This  concrete  illustration  is  arrived  at  by  following  the  incidence  of  a 
single  apartment,  using  the  proportion  of  the  assessed  value  of  a  tenement 
accommodating  twenty  families  assessed  for  $25,000.00,  on  a  site  assessed  for 
$15,000.00.  The  same  principles  and  ratio  apply  to  the  manufacturer  in  erery 
American  city. 


over  of  many  buildings  to  safeguard  the  lives  of  those  employed 
therein. 

The  National  Board  of  Fire  Underwriters  report  that  from  1866 
to  1908  inclusive  the  cost  of  conflagrations  in  the  United  States 
has  totalled  the  sum  of  $936,551,135—  nearly  twice  the  total  muni- 
cipal expenditures  in  1908  of  the  one  hundred  and  fifty-eight  cities 
in  the  country  which  in  that  year  had  a  population  of  30,000  or  over. 
By  conflagration  is  meant  all  fires  involving  a  loss  of  half  a  mil- 
lion dollars  and  over. 

The  "American  Year  Book"   states,  "The  direct  and  indirect 
losses  from  fire  in  the  United  States  during  1907  approximated  Is  it  worth 
$450,000,000  or  one-half  the  cost  of  construction.    Of  this  loss  four-  while  discour- 
fifths  or  an  average  of  $1,000,000  per  day  could  be  prevented,  as  aging  $™  ? 
shown  by  comparison  with  the  standards  of  fire  construction  and  fire 
losses  in  the  larger  European  countries."     The  provision  of  fire 
towers  costing  $5,000,  in  a  factory,  with  a  $2.00  tax-rate  on  build- 
ings would  mean  penalizing  the  owner  with  $100.00  additional  taxes 
a  year. 

A  firm  leasing  factories  and  lofts  in  the  manufacturing  centers 
of  Manhattan  states,  "The  average  square-foot  rate  for  manufac- 
turing space  in  non-fireproof  buildings  in  this  section  is  twenty- 
five  cents,  in  fireproof  buildings  forty  cents." 

Obviously  the  owner  of  such  a  building  gets  about  the  same  net 
return  upon  his  property  when  fully  occupied,  whether  it  be  fire- 
proof or  firetrap.    The  firetrap  building  may  be  worth  and  assessed 
for  $5,000  or  $6,000,  while  a  new  building  with  the  same  rentable 
area  might  command  higher  rents,  but  the  cost  would  be  in  the  Should  a 
neighborhood  of  $20,000  or  at  least  three  times  as  much.    On  an  manufacturer 
increased  assessment  of  only  $12,000,  however,  the  increased  tax  be  Penalized 


at  a  rate  of  $2.00  per  $100.00  of   assessed  valuation  would  be  *°  r 

fire  protection? 
$240.00  or  i  per  cent  on  a  total  investment  of  $24,000. 

It  should  be  noted  too  that  while  the  owner  of  the  building 
might  have  to  pay  higher  insurance  in  the  old  high  fire-hazard  build- 
ing, that  the  city  also  has  to  pay  more  for  fire  protection  and  fire 
fighting  where  there  are  any  considerable  number  of  such  high  fire- 
hazard  buildings,  and  this  cost  is  reflected  in  the  higher  tax-rate, 
and  proportionately  shifted  to  the  rent  burdens  of  the  poor. 

The  entire  cost  of  maintaining  the  Fire  Department  of  New 
York  City  is  about  $1.72  per  capita  of  population,  as  compared  with 
a  cost  in  Cologne  and  suburbs  of  $0.25  ;  Berlin,  $0.26  ;  London,  $0.19  ;  Discourag'ing 
St.    Petersburg,   $0.22;   Paris,   $0.21;   Budapest,  $0.08.     It   is   of  fireproof 
course  true  that  New  York  City  has  an  extremely  efficient  Fire   buildings  by 


taxation,  means 
more  expen- 
sive fire 
departments. 


Taxing  build- 
ings injures 
both  employers 
and  workers. 


Department,  but  it  is  equally  patent  that  no  such  large  expendi- 
ture would  be  required,  were  there  not  such  widespread  serious  con- 
flagration hazards. 

Even  though  the  owner  of  the  factory  pay  immediately,  too,  the 
increased  insurance  rates  he  will  to  the  best  of  his  ability  shift  this 
increased  cost  on  the  consumer  of  his  goods  or  attempt  to  take  it 
out  of  his  employees,  since  no  manufacturer  except  under  duress 
pays  for  waste,  or  leakage  in  the  cost  of  production.  In  any  event 
these  extra  costs  may  be  partially  laid  to  the  system  of  penalizing 
by  heavy  taxation  the  man  who  safeguards  his  employees,  without 
exonerating  officials  who  permit  the  continuance  of  dangerous  fire- 
hazards.  No  justification  can  be  found  in  morality,  only  in  law, 
for  punishing  or  fining  a  man  for  doing  right.  Taxing  buildings, — 
which  means  the  exemption  of  land  values  from  adequate  taxation 
— injures  both  employers  and  workers.  Each  class  to-day  as  dur- 
ing past  centuries  is  striving  to  secure  the  full  values  of  what  each 
class  produces.  Both  classes  are  despoiled  of  the  values  they  create 
by  the  legal  but  unmoral  extortion  of  ground  rents  by  landowners. 
On  this  point  they  are  agreed,  and  the  most  thoughtful  members 
of  both  classes  realize  that  before  they  can  distribute  equitably  the 
values  of  their  joint  products,  the  confiscation  of  ground  rents 
must  be  terminated  by  reducing  or  abolishing  taxation  of  buildings 
and  other  forms  of  industry. 


CHAPTER   IV. 

Alleged    Objections    to    Heavier    Taxation   of 

Land  Values. 

Aside  from  the  general  objection  to  taxing  land  values  at  a 
higher  rate  than  buildings,  that  it  is  "confiscation  of  property  rights 
and  immoral"  which  is  dealt  with  fully  in  the  chapter  on  "The  Moral 
Sanction  for  Taxing  Land  Values  Heavily,"  several  alleged  objec- 
tions are  raised  which  deserve  careful  consideration.   The  most  im- 
portant objection  presented  is  that  it  "will  create  a  panic  in  real  ^U* fa™  that 
estate  and  prevent  the  construction  of  new  buildings  because  money  iieavier  taxa_ 
will  not  be  loaned  under  such  conditions,  and  mortgages  will  be  tion  of  land 
called."  values  will 

The  most  direct  and  convincing  answer  to  this  claim  is  the  expe-  create  a  real 

rience  of  Vancouver,   British  Columbia.     The  marvelous   success  esia*e  ^anlc 

from  a  financial  point  of  view  of  the  so-called  "single  tax"  experi-  loans  jor  con_ 

ment  in  Vancouver  is  described  by  Mr.  Luther  S.  Dickey  in  the  structing  new 

"Single  Tax  Review"   for  May-June,   1911.     It  should  be  noted,  buildings. 

however,  that  even  Vancouver  has  not  tried  out-and-out  "single  yancouver 

tax,"  that  is  it  has  not  abolished  all  other  sources  of  municipal  rev-  exempts  build- 

enue   since  during  the  year  ending  March  3ist,   1911,  there  was  ings  from 

levied  from  the  city:  taxation,  but 

has  not  a  real 

Personal   Property   *****  «*•" 

Income  Tax   56,876.1 1 

Revenue  Poll  Tax 56,055.00 


Total    $176,306.19 

Brief  reference  must  be  made  also  to  the  system  of  taxation  in 
Vancouver  as  reported  by  the  Mayor,  L.  D.  Taylor,  in  1910:  Mayor  Taylor's 

"The  taxing  of  the  'unearned  increment/  a  term  used  to  express    ex      ™     °   ,. 

the  increase  in  land  values  uninfluenced  by  the  effort  of  the  owner,  is  . 

,  .     ,T  r^.f,  .  of  taxing  land 

no  longer  an  experiment  in  Vancouver.     Fifteen  years  ago  the  city  gov-        , 

1    i T  j  ^  L-1J-  /   •  •  values  \n 

ernment  concluded  to  encourage  building  by  reducing  the  improvement  v 

tax  fifty  per  cent.     The  effect  was  immediate.     Huge  buildings  at  once 
began  to  rise  up  where  shacks  had  stood. 

"In  1906,  as  a  result  of  the  success  of  the  first  experiment,  an  addi- 
tional decrease  of  twenty-five  per  cent  was  made  in  the  improvement  tax. 
At  once  building  operations  showed  another  startling  increase — an 
increase  that  when  compared  with  the  increases  shown  in  the  statistics 
of  other  cities  was  wholly  out  of  proportion  to  the  increase  of 
population. 

33 


Mayor  Taylor 
claims  taxation 
of  land  values 
benefits 
landowners. 


Illustration  of 
effect  of 
exempting 
buildings,  upon 
the  construc- 
tion of 
buildings. 


''At  the  beginning  of  this  year  (1910),  it  was  decided  to  eliminate 
the  building  tax  altogether,  and,  in  consequence,  the  Single  Tax  was 
adopted  in  its  entirety. 

"From  the  beginning  the  cities  of  the  Canadian  West  have  taken 
the  initiative  in  promoting  the  Single  Tax  policy  by  putting  it  into 
actual  operation  while  other  municipal  governments  have  not  reached 
beyond  the  theoretical.  Vancouver's  policy  of  valuing  land  at  full  capital 
value  and  improvements  at  only  fifty  per  cent,  thereby  taxing  buildings 
only  half  as  much  as  sites,  was  adopted  long  before  the  Single  Tax 
leaders  had  begun  their  campaign  of  education  that  to-day  reaches 
around  the  world.  And  so  satisfactory  was  this  first  experiment  that 
when  the  further  reduction  of  twenty-five  per  cent  was  made  so  as  to 
tax  the  capital  value  of  improvements  only  one-quarter  as  much  as  that 
of  sites,  the  opposition  was  so  small  as  to  be  scarcely  worth  taking  into 
account. 

'The  landowners,  as  a  matter  of  fact,  receive  greater  benefits  from 
the  Single  Tax  than  the  builders  and  building  owners  themselves,  for 
while  the  tax  on  improvements  has  been  abolished,  the  tax  on  land  has 
not  been  increased,  and  still  remains  twenty-two  mills  on  the  dollar, 
just  what  it  was  before  the  Single  Tax  was  adopted.  With  the  tax 
remaining  the  same,  whether  a  site  is  improved  or  unimproved,  it  is 
readily  seen  that  lot  owners  would  rather  have  their  property  improved 
and  bringing  in  an  income.  It  is  simply  a  question  of  which  is  best 
policy,  to  have  a  dollar  lying  idle  in  an  old  stocking,  or  to  have  it  work- 
ing, bringing  in  an  income  at  a  bank. 

"The  municipal  building  statistics  during  the  last  fifteen  years  clearly 
demonstrate  the  value  of  the  Single  Tax  in  hastening  the  substantial 
upbuilding  of  a  city.  Before  the  fifty  per  cent  reduction  in  the  value  of 
building  improvements  was  voted  in  the  year  1895,  building  operations 
in  the  city  of  Vancouver  represented  approximately  $200.00  per  capita. 
In  the  year  1905  the  per  capita  value  of  building  improvements  increased 
to  $245.00,  and  in  1905 — the  end  of  the  ten-year  period  during  which  the 
fifty  per  cent  basis  was  in  operation,  the  per  capita  value  of  improve- 
ments had  increased  to  $284.00.  A  similar  increase  was  shown  immedi- 
ately following  the  further  reduction  of  twenty-five  per  cent.  In  1908 
the  per  capita  valuation  of  building  improvements  was  $302.66,  and  in 
1909  the  figures  were  $308.17,  and  yet  these  statistics,  striking  as  they 
seem,  do  not  half  tell  the  story,  for  the  reason  that  the  population  of 
Vancouver  increased  from  17,000  in  1894  to  over  100,000  last  year,  and 
in  the  last  five  years  has  been  trebled. 

"Since  the  reduction  of  the  improvement  tax  to  twenty-five  per  cent 
in  1906,  more  steel  and  granite  buildings  have  been  erected  in  Vancouver 
than  during  any  previous  decade,  and  in  proportion  to  the  size  of  the 
city,  more  substantial,  costly  buildings  have  been  erected  in  Vancouver 
than  in  any  other  city  on  the  coast.  Beginning  with  the  election  of  last 
January,  when  the  Single  Tax  system  was  adopted  by  the  Council  in  its 
entirety,  permits  for  buildings  have  been  applied  for  at  a  more  rapid 
rate  than  at  any  other  time  since  the  incorporation  of  the  City,  and  it 
is  estimated  that  over  a  million  dollars'  worth  of  handsome  private 
residences  are  either  under  construction  now,  or  will  be  before  the  end 


34 


of  the  year.    Since  the  first  of  the  year  six  steel  skyscrapers  have  been 

projected,  two  of  them  already  under  construction,  and  plans  have  been 

drawn  for  four  more.     Modern  steel  apartment  buildings  are  going  up 

in  every  section  of  the  city,  and  frame  and  brick  buildings  that   for 

years  have  stood  untouched  on  Granville  Street  are  now  giving  way  to 

steel  structures.     The  effect  of  the  Single  Tax  on  building  operations    „_ 

has  been  immediate,  but  nowhere  has  the  beneficence  of  the  system  been  .      . 

more  fully  felt  than  among  factory  workers  and  wage-earners.    In  Van-   va\ues  ana 

couver  seventy-five  per  cent  of  the  toilers  own  their  homes.    This  esti-   exempting 

mate  is  conservative,  and  is  based  on  figures  presented  by  the  employers   buildings 

of  labor.  on  home 

"Other  cities  of  the  west,  making  efforts  to  attract  capital  to  them,  ownership. 
have  discovered  that  landowners  instinctively  'boost'  prices  to  the  out- 
side purchaser,  and  this  stands  in  the  way  of  a  city's  progress.  With 
the  Single  Tax  in  force,  no  property  owner  is  going  to  set  up  a  claim 
that  his  property  is  worth  twice  its  real  value,  when  he  knows  that 
such  a  claim  will  make  him  pay  twice  the  amount  of  taxes  he  is  now 
paying.  Under  the  Single  Tax,  as  it  is  operated  in  Vancouver,  a  new 
sky  line  is  being  built  up  for  the  city,  a  sky  line  of  tall,  substantial 
buildings  of  stone  and  granite,  and  under  the  Single  Tax,  not  only  is 
the  man  who  builds  benefited,  but  also  the  landowner,  the  tenant  and 
the  man  who  works  with  his  hands  in  the  city's  factories  and  saves 
his  money  to  build  his  family  a  place  they  can  call  home." 

In  reply  to  the  statement  that  the  geographical  advantage  of 
Vancouver  and  the  construction  of  railroads  was  the  cause  of  the 
city's  remarkable  growth  and  that  as  high  as  8  per  cent  and  8j^ 
per  cent  is  charged  on  mortgages,  Mayor  Taylor  in  a  letter  to  the  Mayor  Taylor 
writer  says  that :  admits  all 

contributing 

"While  attributing  to  a  great  extent  the  impetus  building  in  this   factors  to 
city  has  received  to  the  adoption  of  a  single  tax  on  land,  he,  together    Vancouver's 
with  other  advocates  of  the  system,  fully  recognize  that  the  geograph-   growth. 
ical  situation  of  Vancouver,  the  number  of   railroads  which  are  being 
directed  to  this  port,  and  other  contributory  causes  have  been  respon- 
sible lor  much  of  the  development  which  has  been  taking  place  in  this 
city  during  the  past  few  years,  and  in  regard  to  the  claim  that  as  high 
as  8  and  8l/2  per  cent  is  charged  on  mortgages,  that  although  such  rates 
prevail   occasionally   when   the   security   is   not   considered   good,   it   is 
hardly  fair  to  quote  rates  like  that  as  usual  for  mortgage  loans  in  Van- 
couver.    The  current  rate  is  6  or  7  per  cent,  on  large  amounts  some- 
times as  low  as  $l/2  per  cent,  when  good  security  is  offered." 

The  following  table,  giving  the  number  of  building  permits, 
value  of  buildings  and  population  of  Vancouver  from  1906  to  1910, 
refutes,  however,  the  charge  that  money  will  not  be  loaned  for  the 
construction  of  buildings: 

35 


Criticism  of 
the  low  tax- 
rate  on  land  in 
Vancouver. 


The  obvious 
remedy  for 
the  low  tax- 
rate  in  Van- 
couver is  a 
higher  tax-rate. 

Vancouver 
should  pay  its 
bills  currently 
instead  of 
b  or  f owing 
money  for 
postponed 
payment. 


ipo6 

Number, 
i  006 

Value. 

$4  ?o8  41  0 

Population. 

c.2  OOO 

IOO7 

1,777 

5,  6  T.2,  744 

6o,IOO 

I008.. 

1,607 

=;,Qc;o,8Q'? 

66,5OO 

IOOO 

2  O54 

7  2^8  ^6^ 

780OO 

IOIO.. 

2.260 

n.mo.tfk 

0^.700 

Fairness  compels  the  admission,  however,  that  there  seems  to 
be  a  defect  in  the  operation  of  the  tax,  because  too  low  a  tax-rate 
is  levied,  only  22  mills  on  the  dollar. 

The  Editor  of  The  Single  Tax  Review,  commenting  on  this, 
says: 

"This  must  be  accepted  as  a  statement  of  fact,  and  not  as  favoring 
the  taking  of  no  more  than  22  mills  on  the  dollar.  It  is  no  part  of 
the  Single  Tax  to  favor  landowners  as  landowners.  But  because  99% 
of  landowners  have  interests  as  builders,  capitalists  or  laborers, 
their  gain  from  the  application  of  the  Single  Tax  principle  must  be 
quite  as  great  as  that  coming  to  other  members  of  the  community.  If 
this  tax  of  22  mills  on  the  dollar  leaves  the  same  amount  of  economic 
rent  or  site  value  in  the  hands  of  the  landowners  as  before,  or  if — as 
now  seems  the  case  in  Vancouver — the  impetus  to  property  caused  by 
the  removal  of  the  tax  on  buildings  has  been  to  actually  increase  eco- 
nomic rent  or  site  value  remaining  to  landowners,  there  is  even  greater 
necessity  of  keeping  on  in  the  way  the  city  has  begun,  and  taking  grad- 
ually an  ever  increasing  proportion  of  land  values  until  the  full  amount 
is  absorbed  for  public  purposes.  Otherwise  Vancouver  faces  the  inevi- 
table interruption  that  comes  to  the  prosperity  of  every  'boom  town' 
whose  history  is  a  matter  of  record." 

The  remedy  for  the  failure  to  secure  a  larger  share  of  the  ground 
rent  is  obvious.  The  city  should,  instead  of  passing  on  to  future 
generations  the  cost  of  providing  public  improvements  such  as 
streets,  sewers,  transit,  schools,  parks,  etc.,  pay  its  way  as  it  goes 
along.  The  result  of  the  policy  the  fathers  and  grandfathers  of 
the  present  citizens  adopted  of  bequeathing  to  us  the  payment 
for  improvements  they  should  have  met,  is  shown  in  the  enormous 
debt  charges  which  burden  American  cities. 

The  Report  of  the  Corporation  of  Vancouver  for  1910  states 
that  the  value  of  the  real  property  of  the  city  at  the  end  of  that  year 
was  $98,777,785,  while  the  outstanding  General  Debentures  and 
Stock  of  the  City  amounted  to  $12,808,265.95,  or  approximately  12 
per  cent  of  the  total  valuation  of  real  estate,  i.  e.,  exclusive  of  im- 
provements which  are  exempt  from  taxation.  About  $10,250,000 
of  this  municipal  indebtedness  bears  interest  of  from  4  per  cent  to 
6  per  cent,  and  over  half  was  issued  for  terms  of  nearly  forty  years, 
while  the  interest  charges  of  the  city  were  in  1910,  $279,861.16, 

36 


exclusive  of  the  lumped  sum  for  "Interest  and  Sinking  Fund"  for 
Schools  and  Waterworks,  aggregating  $178,514.96,  and  the  Sinking 
Fund  (Debentures  other  than  water  and  school)  amounting  to 
$118,091.38. 

In  other  words,  the  total  "debt  service"  of  Vancouver  was  in 
1910,  $575,476.50  out  of  a  total  budget  of  $1,942,227.26,  i.  e.,  about 
30  per  cent.  It  is  partly  due  to  such  reasons  that  land  speculation 
still  continues  as  indicated  by  figures  which  Mr.  Dickey  gives  in  the 
magazine  referred  to  above : 

"Two  lots  on  which  were  two  modest  buildings  were  mortgaged  in   Many  sites 
1904  for  $1,600.    In  1910  the  property  was  sold  for  $55,000.    In  1911  the   in  Vancouver 
assessed  value  of  these  lots  is  $22,500,  but  they  are  on  the  market  for   are  under- 
$75,000.     Three  vacant  lots  were  sold  in  August,  1909,  for  $75,000;  in   assessed. 
April,  1910,  for  $115,000.     They  are  assessed  in  1911  at  $63,125. 

"Another  lot  was  purchased  in  1907  for  $1,100.  The  owner  has 
refused  $10,000  for  it  and  is  holding  it  at  $15,000.  It  is  assessed  for 
1911  at  $3,000." 

Mayor  Taylor  frankly  recognizes  the  necessity  of  securing  by  Mayor  Taylor 

taxation  more  of  the  ground  rent.    He  has  told  the  writer  person-  believes  that 

ally  that  he  expects  to  bring  this  about  as  soon  as  possible,  that  is  the  *ax-rate  on 

just  as  fast  as  public  sentiment  will  permit.  The  first  step,  he  says,  couver  should 

will  be  to  raise  assessed  values  from  65  per  cent,  as  at  present,  to  ^  raised, 
100  per  cent,  that  is  to  full  valuation ;  and  the  next  to  increase  the 
tax-rate  slowly  but  to  a  much  higher  one  than  the  present, — even  at 
full  valuation. 

In  January,  1911,  all  buildings  in  Vancouver  were  restricted  in  And  that 

height  to  120  feet,  but  not  to  exceed  ten  stories  at  the  maximum  restrictions  on 

while  Mayor  Taylor  believes  that  no  tenements  should  be  over  four         "se  °t, 

,  .  , land  are  also 

stories  high  at  most  and  that  the  practical  ideal  for  the  wage-earn-  necessary 

ers  in  cities  on  this  continent  is  detached  dwellings  with  gardens 
and  yards.  The  attainment  of  this  practical  ideal,  too,  he  states,  will 
be  helped  by  heavy  taxation  of  land  values,  but  involves  also  definite 
restrictions  on  the  use  of  land. 

It  is  significant,  too,  that  the  leaders  of  the  organizations  which  New  York 
have  done  most  in  this  country  to  promote  the  construction  of  good  Savings  and 
homes  to  be  owned  by  wage-earners,  the  Savings  and  Loan  Associa-  Loan  Associa- 
tions heartily  favor  the  Deduction  of  the  tax-rate  on  buildings.     Com-  jtow<y.  'avor 
menting  on  the    criticism  of   the  bill    before  the   New  York  State  l^rate  on 
Legislature  to  reduce  the  rate  of  taxation  on  buildings  to  one-half  buildings. 
the  tax-rate  on  land,  Mr.  Walter  L.  Durack,  Chairman  of  the  Execu- 
tive Committee  of  the  Metropolitan  League  of  Savings  and  Loan 
Associations,  says: 


Loaner  of 
millions  on 
buildings,  says 
halving  the 
tax-rate  on 
buildings  will 
help  real 
estate. 


President  of  a 
Savings  and 
Loan  Associa- 
tion says 
halving  of 
tax-Sate  on 
buildings  will 
encourage  the 
loaning  of 
money  on 
buildings. 


"I  have  paid  taxes  for  twenty-five  years  on  vacant  and  improved 
land,  and  have  never  lost  anything  by  reason  of  the  assessment.  Some 
years  I  have  paid  as  high  as  $1,000  in  taxes.  The  halving  of  the  tax- 
rate  on  buildings  will  be  a  benefit  to  real  estate  as  a  whole  in  New 
York  City. 

"I  have  loaned  several  millions  on  such  property,  and  am  sure  that 
halving  the  tax-rate  on  buildings  will  not  in  any  way  interfere  with 
loaning  money  for  all  legitimate  purposes,  whether  on  buildings  or  on 
vacant  land." 

Mr.  Charles  O'C.  Hennessy,  President  of  the  Franklin  Society 
for  Home  Building  and  Savings,  says: 

"So  many  misleading  statements  have  been  made  as  to  the  result  of 
making  the  rate  of  taxation  on  buildings  one-half  the  rate  of  taxation  on 
land,  as  provided  in  the  Sullivan-Shortt  bills,  by  five  equal  reductions  in 
as  many  consecutive  years,  that  I  wish  to  express  my  judgment  on  the 
matter,  reached  through  twenty-five  years  of  experience  in  the  business 
of  placing  loans,  as  an  officer  of  a  savings  and  loan  association.  During 
this  quarter  of  a  century  I  have  placed  many  millions  of  dollars  in 
loans  on  buildings. 

"Even  admitting  that  there  would  be  a  slight  reduction  in  the  value 
of  land,  this  will  be  only  a  small  portion  of  the  increase  in  the  value 
of  new  buildings.  A  difference  is  made  in  the  rate  of  taxation,  not  in 
the  assessments. 

"The  other  claim  that  mortgages  would  be  called  in  upon  a  large 
scale  is  also  disproven  by  the  past  experience  of  the  city.  The  average 
increase  in  the  rate  of  taxation  on  both  land  and  improvements  in  most 
of  the  boroughs  of  the  city  during  the  past  three  years  has  been  as 
great  as  the  increase  that  would  be  involved  in  halving  the  tax-rate  on 
buildings  and  no  panic  has  resulted.  An  increase  of  .09  per  $100.00  on 
assessed  value  of  a  tenement,  assessed  for  $30,000,  on  a  lot  assessed  for 
$10,000,  is  $36.00.  With  the  halving  of  the  tax- rate  on  buildings,  how- 
ever, while  the  increase  in  the  tax-rate  on  land  will  amount  to  about 
$9.00  this  year,  the  decrease  in  the  tax  on  buildings  is  about  $39.00  a 
year,  showing  a  net  saving  of  $30.00  a  year,  or  by  the  time  the  full  half 
tax-rate  on  buildings  is  in  force,  of  about  $150.00.  Even  when  this  rate 
is  in  operation,  however,  the  tax-rate  on  land  will  be  only  about  $2.20 
per  $100.00  of  assessed  value.  A  building  in  moderately  good  order  is 
usually  assessed  for  from  two  to  three  times  the  assessment  on  the  land, 
and  the  larger  earning  capacity  of  the  buildings  through  reduced  taxes 
would  encourage  the  lender  of  money  to  let  his  loan  remain  on  the 
property.  To  call  this  legislation  'confiscatory'  in  an  economic  sense  is 
illogical,  since  a  tax  of  even  $3.00  on  land,  or  about  half  as  much  again 
as  would  be  required,  would  leave  a  margin  of  5  per  cent  to  6  per  cent 
profit.  If  the  tax  were  $2.20  per  $100.00  value  on  both  land  and  build- 
ings, the  Allied  Real  Estate  Interests  would  probably  not  call  it  'confis- 
catory/ but  it  is  the  distinction  in  rate  of  taxation  on  land  and  buildings 
which  seems  to  perturb  them  needlessly.  Mr.  Robinson  continues:  'Leg- 
islation which  is  confiscatory  in  character  as  this  is  would  drive  such 
investors  out  of  the  mortgage  markets.  As  a  result  of  this  driving  out 

38 


of  investment  funds,  there  would  be  an  inability  to  replace  the  mortgages 

so  called,  and  a  panic  in  real  estate  price  would  ensue.'     As  has  been 

shown,  loans  on  improved  land  would  not  be  withdrawn,  since  they  are 

safer  with  a  better  return.     The  only  real  estate  upon  which  there  is 

the  remotest  possibility  of  any  such  effect  as  Mr.  Robinson  predicts  is 

vacant  and  underimproved  land.     The  effect  of  such  a  tax  upon  this 

vacant  land  will  be  to  compel  the  owner  to  improve  it,  and  this  is  just 

what  it  is  intended  for.    Money  is  not  lent,  however,  upon  vacant  land, 

and  so  the  slightly  higher  tax  upon  land  will  not  affect  the  present  loans 

to   any  material   extent.     The   cheaper  the  land,  the  more  inducement 

there  is  to  the  owner  to  improve  it  adequately,  which  is  stimulated  by 

the  lower  tax-rate  on  buildings.     It  is  evident  that  the  exact  reverse  of 

the    calamity   the    Allied    Real    Estate   Interests  predicts   would   follow  stead  Of  a 

the  enactment  of  this  bill,  would  actually  occur,  and  that  there  would    caiamity}  as 

be  a  marked  stimulus  to  the  construction  of  much  needed  tenements   c\a{mea  by  real 

and  homes  and  factories  to  relieve  the  fearful  overcrowding  of  rooms    esfafe  interests 

in  tenements  such  as  the  Congestion  Commission  reports,  and  the  over-    t^  w^  benefit 

crowding  of   factories   such  as  was  an  important  cause  of  the  recent    fgnan^ 

disaster  in  the  Triangle  Shirt  Waist  Factory  in  the  Asch  Building."* 

Mr.  John  Moody,  editor  of  Moody' s  Manual  and  Moody's  Maga-  John  Moody 
zine,  states:  says  halving 

the  tax-rate  on 

"I  am  unhesitatingly  endorsing  the   Sullivan-Shortt  bill   for  grad-    \)Uii<angS  {s  the 
ually  reducing  the  rate  of  taxation  on  buildings  and  concentrating  it  on   most  jusf  p{ece 
land  values,  for  the  reason  that  it  appears  to  be,  by  every  analysis,  the   Oj  \egis\ai{on 
sanest  and  most  just  piece  of  legislation  proposed  in  many  a  long  day.    proposed  for 

"Every   so   often   a   lot   of   comfortable    and   well-meaning   people   a  long  time, 
(many  hailing  from  Wall  Street,  where  I  come  from)   suddenly  awake   and  that  most 
to  the  fact  that  the  housing  conditions  in  this  great  city  are  deplorable    tenetnent- 
and  that  the  congestion  of  population  'is  most  alarming.'     Committees   house  legisla- 
are  appointed,  campaigns  are  waged,  public  parks  in  the  congested  dis-    twn  increases 
tricts  are  advocated,  model  tenements  are  proposed,  and  then,  after  all    congestion. 
these  things  are  done,  everybody  is  surprised  to  find  that  rents  have 
mounted  still  further,  and  the  congestion  is  greater  than  ever. 

"But  here  at  last  we  have  a  bill  which  goes  to  the  root  of  the  situa- 
tion. No  one  will  dispute  me  when  I  say  that  I  know  something  about 
the  meaning  of  speculation.  An  experience  of  over  twenty-five  years 
in  Wall  Street,  where  the  whole  atmosphere  is  charged  with  speculation, 
has  taught  me  to  do  a  little  thinking  now  and  then.  And  I  know  what  I 
am  talking  about  when  I  say  that  nearly  everything  in  Wall  Street  of 
a  really  speculative  nature  is  capitalized  land  value.  I  have  for  years 
seen  this  land  value  grow,  in  the  shape  of  stocks  and  bonds,  until  to-day 
we  have  about  eighty  billions  of  dollars'  worth  of  corporate  stock  in 
this  country,  of  which  more  than  half — the  speculative  half — is  based 
on  land  values  purely. 

"What  are  these  land  values?  Are  they  capital?  Capital  is  simply 
stored-up  labor,  and  labor  is  the  one  thing  which  produces  wealth.  This 
production  of  wealth  is  not  a  bad  thing;  it  is  a  good  thing.  It  is  the 

*Note. — At  a  fire  in  this  building,  143   girls  lost  their  lives  owing  to 
inadequate  fire  exits  and  fire  protection. 

39 


Mr.  As  tor 
objects  to 
taxing  land 
values  because 
it  would 
reduce  his 
rents. 


Mr.  Moody 
says  taxation 
of  land  values 
tends  to  pre- 
vent panics. 

Transit  lines 
alone  without 
heavy  taxation 
of  land  values, 
encourage 
land  specu- 
lation. 


cornerstone  of  our  entire  civilization,  and  why  the  people  should  be  so 
anxious  to  tax  it  is  something  I  never  could  understand.  Of  course  I 
understand  why  landowners  wish  to  tax  it.  Something  must  be  taxed, 
and  Mr.  Astor,  who  owns  both  lands  and  improvements,  knows  that  as 
long  as  labor  keeps  busy  feeding  and  clothing  itself  in  New  York  City, 
his  lands  will  grow  in  value  without  any  effort  on  his  part,  and  he  will 
be  able  to  increase  his  rents  in  direct  proportion  to  the  increase  in  the 
value  of  his  lands.  So  why  should  he  wish,  through  land  value 
taxation,  to  disturb  his  present  satisfactory  position? 

"Some  one  has  said  that  to  take  taxes  off  improvements  and  put 
them  on  land  values  would  be  confiscatory.  Confiscation  is  a  great 
word,  especially  in  Wall  Street.  If  taxing  land  values  is  confiscation, 
why  is  not  the  reduction  of  the  tariff  also  confiscation?  To  abolish  the 
tariff  on  steel  would  impoverish  a  whole  lot  of  people  who  have  invested 
in  Steel  Trust  stock  at  fancy  prices,  just  as  to  tax  the  full  speculative 
value  of  land  would  impoverish  many  speculators  who  are  working  land 
booms  at  the  present  moment.  But  on  the  other  hand,  abolishing  the 
tariff  on  steel  products  would  give  us  cheaper  steel,  just  as  the  lighten- 
ing of  the  tax  on  buildings  would  give  us  lower  rents  and  tend  to 
relieve  congestion. 

"I  know  something  about  panics  and  their  causes,  and  I  do  not 
hesitate  to  come  out  flat-footed  and  say  that  this  is  just  the  character 
of  legislation  which  will  tend  to  prevent  panics,  as  well  as  relieve 
congestion." 

2.  "Adequate  transit  lines  alone,  will  prevent  speculation  in 
land  without  the  taxation  of  land  values." 

If  there  is  any  subject  upon  which  real  estate  owners,  especially 
owners  of  vacant  land,  have  mesmerized  the  public  in  American 
cities  it  is  rapid  transit.  It  is  perfectly  true  that  enough  transit  into 
cheap  land,  that  is,  lines  which  bring  land  cheap  at  the  time  they  are 
projected  into  the  market  by  reducing  the  time  from  such  lands  to 
the  business  and  manufacturing  centers  of  a  city  might  have  some 
effect — temporarily  only — in  reducing  the  price  of  land.  Just  the 
reverse  is  the  object  of  the  owners  of  the  vacant  land  who  hound 
municipal  authorities  to  run  transit  lines  out  into  their  vacant  land. 
Wood,  Harmon  &  Co.,  a  prominent  real  estate  operating  company 
recently  advertised  in  several  New  York  papers — apropos  of  the 
proposed  extension  of  transit  lines  into  Brooklyn  where  they  own 
or  control  20,000  lots,  assessed  for  about  $15,000,000 — that  they 
would  guarantee  the  same  increase  in  value  of  some  of  their  lots 
with  the  proposed  transit,  as  had  occurred  in  the  Borough  of  the 
Bronx  where  lots  worth  a  few  hundred  dollars  were  increased  in 
value  to  four  or  five  thousand  dollars  with  the  provision  of  rapid 
transit. 


One  touch  of  cupidity  makes  the  whole  landowning  fraternity 
akin,  and  every  real  estate  owner  throughout  the  country  is  striving 
to  secure  the  same  special  privilege  of  getting  free  transit  to  his 
land,  to  increase  its  value  and  his  resulting  profits,  and  not  primarily 
to  keep  his  land  cheap  for  the  healthy  dwellings  of  wage-earners 
and  other  workers.  While  self-preservation  may  be  the  first  law  of 
nature,  to  get  rich  at  other  people's  expense  is  the  second. 

Another  point  also  deserves  consideration,  the  fact  that  money 
invested  in  transit  is  costing  the  city  not  only  sinking  fund  charges, 
but  interest  as  well.  Some  transit  companies  in  New  York  have 
now  reached  the  height  of  dependence  in  asking  that  the  city  shall 
guarantee  them  net  profits  equal  to  those  at  least  of  an  ordinary  Free  transit 
industrial  company.  On  the  other  hand,  charitable  experts  like  Mr.  and  guaranteed 

Cyrus  L.  Sulzberger,  for  many  years  President  of  the  United  He-  profitf  to 

/*••••    *T.      «r  •    •      1  transit  cow- 

brew  Chanties  in  New  York,  have  suggested  that  transit  in  that  city  panies  are 

of  such  high  land  values  and  exorbitant  rents  should  be  as  free  as   merely  levies 
walking  in  the  streets.     Naturally  the  land  speculator  cheerfully   on  tenants  to 
pronounces  his  benediction  upon  both  suggestions  because  he  makes  increase  the 
money  from  the  passengers  coming  and  going  under  both  proposi-  ?r°VJ 
tions.    The  "forgotten  man"  in  the  case  is  the  millions  of  sweated 
tenement  dwellers  who  under  our  present  system  of  taxing  land  and 
buildings  at  the  same  rate  pay  the  "guarantee"  on  the  cost  of  super- 
fluous transit  and  "free"  passage  for  the  few  people  with  short  hours 
of  work,  who  could  take  legalized  joy  rides  at  the  taxpayers'  expense 
out  to  the  cheap  lands  whose  values  rise — but  are  taken  by  the  land- 
owner— at  just  about  the  same  rate  as  the  tax-rate  of  the  poorest 
citizens  who  are  left  behind  in  crowded  sections  of  the  city. 

One  of  the  traffic  experts  of  the  Brooklyn  Rapid  Transit  Com-  A  case  in  Point 

pany  told  the  writer  that  that  company  in  response  to  the  demand   °n  translt 
r  .  .  ,  .  ..          r  .  -,  lines  through 

from  citizens  has  planned  lines  far  out  from  the  center  of  Manhat-  unusea  \ana  t0 

tan  which  would  not  be  needed  for  many  years,  at  a  total  cost  of  at  farm  land. 
least  $12,000,000.     Now  4  per  cent  interest  and  2  per  cent  sinking 
fund  charges  will  mean  a  cost  of  $720,000  a  year  on  this  one  invest- 
ment, to  be  sure  not  a  large  sum  for  a  city  which  refuses  to  think 
in  terms  of  less  than  millions,  but  nevertheless  a  preventable  waste, 
when  there  are  scores  of  thousands  of  vacant  or  underimproved   Cheaper  to  tax 
lots  within  a  short  distance  of  the  city's  centers  which  would  be   land  than  (° 
made  available  for  business  and  tenement  use  by  taxing  them  a  * 

little  higher  and  taking  taxes  off  buildings. 

Superfluous  transit  is  a  waste  in  the  cost  of  production  which  can 
be  largely  eliminated  by  taxation  of  land  values  which  will  bring 
available  land  into  the  market. 

41 


Unused  transit 
facilities 
should  be 
availed  of  be- 
fore new  lines 
are  constructed. 

Removal  of 
•factories  from 
city's  centers 
will  distribute 
population, 
but  will  not 
keep  land 
cheap. 


The  old  plea 
of  unconstitu- 
tionally. 


The  unused  capacity  of  existing  transit  facilities  in  every  Ameri- 
can city  should  be  availed  of  before  more  transit  at  the  cost  of  the 
citizens  at  least  is  suggested.  The  situation  may  be  further  illus- 
trated by  the  growing  tendency  in  American  cities  to  decentralize 
industries.  Naturally  this  involves  the  construction  of  lines  to 
carry  freight,  or  the  expense  of  trucking  and  draying.  There  are 
comparatively  few  cities  in  the  country  in  which  the  municipality 
constructs  or  owns  such  lines  (San  Francisco,  Los  Angeles,  and 
New  Orleans  being  exceptions),  but  this  is  a  much  more  economical 
method  of  distributing  population  since,  as  Adam  Smith  remarked, 
man  is  the  most  difficult  luggage  to  move.  Where  freight  belt  lines, 
as  in  Chicago  and  as  contemplated  in  New  York  City,  are  con- 
structed, however,  by  private  initiative  the  need  of  taxing  land  val- 
ues to  keep  the  land  thereby  made  accessible,  availably  cheap,  is 
more  patent,  although  actually  the  need  is  practically  the  same 
whether  freight  or  transit  lines  are  provided. 

3.  "The  taxation  of  buildings  and  personalty  at  a  higher  rate 
than  land  is  not  constitutional  since  it  deprives  people  of  their  prop- 
erty without  due  process  of  law  and  discriminates  against  one  form 
of  property  in  favor  of  another." 

In  the  first  place  it  is  impossible  to  foresee  what  laws  will  be 
declared  constitutional  and  what  unconstitutional.  The  views 
of  state  courts  on  confiscation  of  property  differ  widely.  It  is  appar- 
ent, however,  that  if  any  state  legislature  enact  a  law  differentiating 
between  classes  of  property  which  it  creates,  this  cannot  be  held  to 
be  "without  due  process  of  law."  The  American  people  in  their 
effort  to  secure  for  themselves  the  right  of  self-government,  of  which 
court  decisions  have  to  a  certain  extent  deprived  them,  are  in  pretty 
general  agreement  with  Abraham's  Lincoln's  statement  that  if  the 
policy  of  the  government  upon  vital  questions  affecting  the  whole 
people  were  to  be  irrevocably  fixed  by  decisions  of  the  Supreme 
Court,  the  people  would  have  ceased  to  be  their  own  rulers.  In 
point  of  fact  the  Supreme  Court  has  seldom  declared  unconstitu- 
tional any  act  to  protect  the  public  health  passed  by  a  state  legis- 
lature, and  the  taxation  of  land  values  has  been  pretty  definitely 
shown  to  be  an  important  health  measure. 

A  case  recently  before  the  United  States  Supreme  Court  on 
which  they  delivered  an  opinion  April  4th,  1910,  upheld  the  right 
of  a  state  to  differentiate  in  taxing  (Southwestern  Oil  Co.  vs.  Texas 
217  U.  S.  11,430  Supreme  Court  496,  affirming  100  Texas  647). 
A  Texas  statute  imposed  a  2  per  cent  tax  upon  gross  receipts  from 
any  or  all  oils,  etc.,  sold  at  wholesale  in  the  state  and  a  tax  amount- 


ing  to  2  per  cent  of  the  cash  market  value  sold  or  handled  or  dis- 
posed of  in  any  manner  in  the  state.  This  was  upheld  by  the  state 
court  but  appeal  taken  to  the  United  States  Supreme  Court  which 
affirmed  the  state  court  in  the  following  opinion  : 

"The  Fourteenth  Amendment  was  not  intended  to  cripple  the  taxing  The  United 

power  of  the  states,  or  to  impose  upon  them  any  iron  rule  of  taxation.  States  Supreme 

"This  court  will  not  speculate  as  to  the  motive  of  a  state  in  adopt-  Court  has 

ing  taxing  laws,  but  assumes  —  the  statute  neither  upon  its  face  nor  by  affirmed  that 

necessary    operation    suggesting    a    contrary    assumption  —  that    it    was  the  Fourteenth 

adopted  in  good  faith.  Amendment 

"Except  as  restricted  by  its  own  or  the  Federal  Constitution,  a  state  wa*  ™°    in 
may  prescribe  any  system  of  taxation  it  deems  best,  and  it  may,  without 

violating  the  Fourteenth  Amendment,   classify  occupations   imposing   a  . 

tax  on  some  and  not  on  others,  so  long  as  it  treats  equally  all  in  the 

me  states. 
same  class. 

"An   occupation   tax  on   all   wholesale   dealers  in   certain   specified 
articles,  does  not  on  its  face  deprive  wholesale  dealers  in  those  articles 
of  their  property  without  due  process  of  law  or  deny  them  the  equal       *"*    ^  * 
protection  of  the  law,  because  a  similar  tax  is  not  imposed  upon  whole-   *ec 
sale  dealers  in  other  articles,  and  so  held  as  to  the  Kennedy  Act  of   canno    wan~ 


, 
Texas  in  1905,  levying  an  occupation  tax  on  wholesale  dealers  in  coal   *.?  interfere 


,      .        ,     M  state 

and  mineral  oils. 

statutes  on 
"A  federal  court  cannot  interfere  with  the  enforcement  of  a  state    ques^ons  oj 

statute,  merely  because  it  disapproves  of  the  terms  of  the  act,  questions   judgment 
the  wisdom  of  its  enactment,  or  is  not  sure  as  to  the  precise  reasons 
inducing  the  state  to  enact  it." 

A  further  point  has  been  raised  that  by  taxing  buildings  at  a 
different  rate  from  that  imposed  on  land  a  legislature  is  really  creat- 
ing a  new  kind  of  property  since  the  term  "realty"  as  generally  used 
includes  both  land  and  buildings. 

A  legislature  would  not  be  creating  any  new  kind  of  property, 
however,  since  there  is  a  clear,  vital  and  permanent  distinction  be- 
tween buildings  and  land,  but  would  be  merely  recognizing  that 
distinction.  A  legislature  would  appear,  however,  from  the  follow- 
ing decisions  of  the  New  York  State  Court  of  Appeals  to  have  au- 
thority to  create  such  different  classes  of  property. 

The  power  of  the  legislature  in  matters  of  taxation  is  broader  powers  Of 
than  in  almost  any  other  field.  state  legisla- 

In  the  case  of  Janet  vs.  City  of  Brooklyn,  99  N.  Y.  300,  the  Court  tures  *n 
of  Appeals  said:  matters  of 

taxation  are 
"The  power  of  taxation  being  legislative,  all  the  incidents  are  within   very  broad. 

the  control  of  the  legislature.    The  purposes  for  which  a  tax  should  be 

levied  ;  the  extent  of  taxation  ;  the  apportionment  of  the  tax  ;  upon  what 

property  or  class  of  persons  the  tax  shall  operate;   whether  the  tax 

43 


Discrimination 
between  dif- 
ferent classes 
of  property  is 
recognized  in 
state  laws. 


Heavy  taxation 
of  land  values 
is  urged  only 
for  municipal 
purposes,  other 
unearned  in- 
comes should 
be  taxed  for 
state  and  fed- 
eral purposes. 


shall  be  general  or  limited  to  a  particular  locality,  and  in  the  latter  case, 
the  fixing  of  a  district  of  assessment;  the  method  of  collection,  and 
whether  the  tax  shall  be  a  charge  upon  both  person  and  property,  or 
only  on  the  land,  are  matters  within  the  discretion  of  the  legislature, 
and  in  respect  to  which  this  determination  is  final." 

Discrimination  between  different  classes  of  property  or  different 
kinds  of  transactions  is  generally  recognized  in  our  present  tax  law. 
Thus  in  New  York,  transfers  of  stock  are  taxed,  but  not  transfers 
of  general  merchandise,  inheritances  are  taxed  at  various  rates  ac- 
cording to  the  value  of  the  property  affected  and  the  relationship 
of  the  beneficiary  to  the  deceased  owner.  Mortgages  are  taxed 
differently  from  other  personal  property,  and  this  mortgage  tax  law 
was  upheld  by  the  Court  of  Appeals  in  a  strong  decision  in  the  Case 
of  People  vs.  Ronner,  reported  in  185  N.  Y.,  page  285.  Similar 
differentiations  exist  in  the  tax  laws  of  other  states. 

Relatively  little  fear  need  be  felt  as  to  the  constitutionality  of 
the  proposed  measure,  although  it  might  perhaps  be  held  by  courts 
that  any  sudden  change,  as  the  sudden  abolition  of  all  other  forms  of 
taxation  and  the  concentration  of  all  the  cost  of  government  on  land 
values,  would  be  confiscation,  because  upsetting  the  basis  of  business 
transactions  without  giving  any  time  for  adjustment. 

4.  "Other  sources  of  wealth  are  as  much  'unearned'  as  the  in- 
crement of  land  values." 

Prof.  E.  R.  A.  Seligman,  discussing  the  "single  tax"  in  his  "Prin- 
ciples of  Taxation"  urges  strongly  the  injustice  of  taxing  only  land 
values  and  exempting  large  fortunes  made  in  speculation  on  stock 
markets,  etc.,  from  heavier  taxation.  So,  too,  the  fortunes  acquired 
through  patent  rights  and  copyrights,  it  has  been  claimed,  should  be 
taxed  more  heavily  as  well  as  land  values.  With  these  contentions 
the  writer  is  in  complete  agreement,  so  long  as  and  to  the  extent 
that  such  sources  of  wealth  are  as  unearned  as  is  a  large  part  of  the 
increment  of  land  values.  It  must  be  remembered,  however,  that 
the  taxation  of  land  values  in  cities  is  urged  for  municipal  revenue 
alone  and  not  for  state  or  national  government.  Proper  sources  of 
revenue  for  national,  state  and  municipal  purposes  should  not  be 
confused  any  more  than  should  political  issues  in  these  three  politi- 
cal districts. 

The  total  appropriations  by  Congress  for  1911  amount  to  $1,027,- 
900,623.  While  the  total  Public  Debt  of  the  United  States  bearing 
interest  is  only  $913,317,490,  the  debt  not  bearing  interest  is  $381,- 
497»583,  and  manifestly  the  disadvantages  of  a  large  debt  justify 
the  finding  of  new  sources  of  revenue  for  the  federal  government. 


44 


Diminishing  returns  from  the  tariff  will  make  this  an  urgent  prob- 
lem, despite  any  economies  that  may  be  made  in  federal  expendi- 
tures. Arguments  which  might  pertinently  be  brought  against  a 
single  tax  upon  land  for  the  support  of  all  government  in  the 
country,  federal,  state,  county,  municipal,  etc.,  have  no  weight 
in  considering  the  propriety  of  taxing  land  values  more  heavily  for 
municipal  purposes.  Prof.  Seligman  himself  in  his  argument  before 
the  Committee  on  Taxation  of  the  New  York  City  Commission  on 
Congestion  of  Population  seemed  to  favor  a  land  increment  tax, 
for  he  stated : 

"I  do  believe  that  if  you  were  to  have  such  a  system  as  the  tax  on   Prof.  E.  R.  A. 
the  unearned  increment,   secure  a  large   revenue   from  that,   and  with   Seligman 
that  revenue  institute  certain  proceedings  which  would  make  the  suburbs    endorses  land 
far  more  attractive  to  the  citizen,  you  would  directly  or  perhaps  indi-   increment  tax 
rectly  accomplish  great  results.     For  instance,  in  some  of  the  German  to  make 
towns  they  utilize  for  the  cities  large  sums  secured  in  the  main  from  suburbs 
their  insurance  funds  and  the  unearned  increment  tax,  for  the  building   attractive. 
of  model  tenement  houses,  for  the  improvement  of  the  suburban  sec- 
tion and    for   the   development   of  transportation   facilities.      Those,   it 
seems  to  me,  are  the  important  points  to  be  considered.    How  can  you 
make  it  possible  for  people  now  living  in  the  slums  to  live  in  places 
where  land  values  are  much  less  and  at  the  same  time  attend  to  their 
ordinary  vocations  in  life?" 

Mr.  Chairman:  "Was  the  raising  or  the  expenditure  of  the  money 
to  have  the  effect  you  speak  of?" 

"The  expenditure  would  not  have  been  made  but  for  the  increased  ^nd  admits 
revenues  which  were  designed  to  afford  the  means  for  this  increased  social  advan- 
expenditure.     The  tax  on  the  unearned  increment  in  the  German  cities    tages  of  such 
has  been  too  recent  and  too  slight  to  warrant  any  conclusion,  but  it  is   °  tax- 
expected,  and  on  general  principles  it  would  be  expected,  that  a  tax  on 
unearned  increment  would  of  course  prevent  the  appreciation  to  that 
extent  of  the  value  of  land  and  would  therefore  prevent  any  further 
congestion." 

With  reference  to  a  lower  rate  of  taxation  on  buildings  than  on 
land,  Prof.  Seligman  said: 

"Of  course  anything  that  would  tend  to  decrease  the  capitalized 
value  of  the  land  would  tend  so  far,  at  all  events,  to  reduce  congestion. 
If  you  could  arrange  the  system  of  taxation  in  a  way  that  is  not  pos- 
sible under  present  constitutional  methods,  i.  e.,  if  you  divide  the  city  up 
into  districts  and  put  different  rates  upon  different  districts,  then  you 
could  to  that  extent  diminish  the  value  of  real  estate  of  some  districts 
and  of  course  increase  it  in  others." 

Mr.  A.  C.  Pleydell,  Secretary  of  the  International  Conference 
on  State  and  Local  Taxation  and  the  New  York  Tax  Reform  Asso- 
ciation, says : 

45 


Mr.  A.  C.  Pley- 
dell  claims  the 
advantages 
of  municipal 
improvements 
to  the  land- 
owners justify 
the  city  in  se- 
curing more  of 
land  values. 


"Taxation  of 
land  incre- 
ments should 
be  accompanied 
by  recouping 
owners  for 
decreased 
land  values." 


The  city  is  not 
obligated  to 
participate  in 
land  specula- 
tion because  it 
taxes  land 
increments. 


"One  reason  why  it  seems  it  would  be  fair  for  the  land  in  a  grow- 
ing community  to  bear  the  higher  rate  of  tax  is  that  the  benefits  of 
public  expenditures  go  so  largely  to  increase  the  value  of  improvements. 
We  need  not  talk  of  who  gets  the  benefits  of  these  increased  values  or 
the  amounts;  that  is  an  abstract  question  at  the  moment.  The  practical 
question  is  that  the  city  is  collecting  and  spending  every  year  an  enor- 
mous amount  of  money.  A  good  deal  of  this  is  spent  on  things  that 
may  not  be  easily  seen  to  be  reflected  in  the  increased  value  of  land, 
but  a  great  part  of  it  is  reflected  in  the  higher  land  value  as  street 
paving  and  such  things,  which  we  all  know  and  admit  tend  to  increase 
materially  the  value  of  land.  Public  expenditures  tend  to  increase  the 
value  of  land  in  the  centers  as  well  as  in  the  outlying  districts.  There- 
fore you  ought  to  adopt  the  policy  of  taking  a  larger  share  of  the  value 
of  land.  It  is  extremely  hard  to  say  just  where  the  increase  does 
come,  but  we  know  it  does  come.  We  know  public  improvements  will 
increase  the  value  of  land  some  distance  away  from  the  improvement, 
as  well  as  nearby,  because  such  improvements  enable  the  people  to  reach 
a  business  center.  The  Brooklyn  Bridge,  for  instance,  is  a  shining 
example  of  the  fact.  It  has  increased  values  right  around  the  Brooklyn 
Bridge,  but  the  Park  Row  rents  are  not  nearly  as  high  as  the  Broadway 
rents  or  lots,  and  it  has  increased  the  value  of  the  land  in  all  down- 
town districts.  The  increased  tax  upon  these  values  would  help  to  pay 
for  these  public  improvements,  which  in  turn,  when  they  are  made,  will 
help  to  increase  largely  the  value  of  the  land." 

5.  "A  land  increment  tax  is  unfair  unless  the  city  similarly  re- 
coups the  owner  of  land  for  any  decrease,  especially  when  due  to 
changes  in  proposed  public  improvements." 

The  shifting  of  land  values,  decrease  in  one  section  and  increase 
in  another  section  is  constantly  going  on  in  many  cities. 

A  decrease  in  value  always — where  assessments  are  frequently 
and  carefully  made — results  in  decreased  assessments,  and  hence 
diminished  taxes,  while  frequently  such  decreases  are  only  tem- 
porary and  due  to  the  transformation  of  the  district  from  one  use 
to  another  as  from  residence  to  commercial  purposes.  There  are 
only  a  few  spots  in  any  American  cities  where  there  would  not  be  a 
demand  for  land  if  the  ground  rentals  were  not  so  high.  Failure 
of  the  city  to  prevent  too  intensive  use  of  land  as  well  as  to  tax 
it  adequately,  tends  to  create  fictitious  land  values,  which  naturally 
slump  later  as  any  speculative  values  are  apt  to  do. 

A  favorite  objection,  however,  is  that  when  a  city  projects  a 
transit  line,  a  parkway,  etc.,  to  be  constructed  at  the  expense  of  the 
entire  city,  and  then  changes  its  plan,  the  city  should  return  to  the 
owner  of  land  the  value  of  which  has  been  increased  the  proportion 
of  that  increased  value  which  it  has  taken.  The  defect  in  this 
reasoning  is  apparent.  The  assessment  is  supposed  to,  and  where 
properly  made,  does  merely  register  the  actual  open  market  value 

46 


of  the  land.  This  value  of  land  the  city  does  not  determine,  nor  has 
the  land  any  increased  value  merely  because  the  transit  lines  are 
planned,  nor  even  after  they  are  constructed,  except  that  due  to  the 
people  who  use  it.  A  network  of  railways  through  a  district  where 
people  could  not  possibly  exist  would  not  increase  the  value  of  land 
in  that  district.  The  owners  of  land  which  it  is  anticipated  will  be 
needed,  discount  that  value  and  attempt  to  secure  it  all. 

The  arguments  for  and  against  a  land  increment  tax  are  suc- 
cinctly stated  by  Mr.  Robert  Brunhuber  of  Cologne : 

ist.  The  increase  in  the  value  of  land  is  usually  partly  earned,  Mr- 

only  in  rare  cases  completely  unearned.  ,™n  u°er 

,.  ,        discusses  the 

2nd.  If  the  increase  in  the  value  is  to  be  taxed,  a  decline  in  value  ian(^  {ncre. 

is  to  receive  compensation,  and  more  particularly  where  the  same  in-  ment  tax. 
dividual  incurs  a  loss  in  selling  one  piece  of  property,  this  is  to  be 
deducted    from   any   gain   secured   by   him   on   another   piece   of 
property. 

3rd.  The  tax  will  be  shifted  from  the  seller  to  the  buyer.  It 
will  raise  the  value  of  the  land  and  so  impede  the  progress  of  land 
reform. 

(1)  Land  value  not  only  represents  return  on  capital,  but  a  A  land  incre- 
ground  rent  which  must  be  paid  by  the  rest  of  the  population  to  ment  iax  aoes 

the  owner  of  the  land.    In  cases  of  land,  more  than  any  other  form  n,°*  ™pe  out 

-  ,  .  .   .  the  increment. 

of  ownership,  great  values  are  created  by  the  activity  of  the  com-  but  mereiy 

munity  or  by  mere  chance.  taxes  it. 

This  form  of  taxing  unearned  increments  does  not  propose  to 
wipe  out  by  taxation  the  increase  in  value,  it  is  simply  to  be  taxed. 
The  increment  tax  is  valued  on  a  newly  accruing  income.  It  levies 
no  burden  on  the  taxpayer;  only  lessening  an  existing  largely  un- 
earned gain  (when  levied  at  time  of  sale). 

/    \    T*  r       •         i       1  ,  1  .,  .        Decreases  in 

(2)  Taxation  of  gams  should  be  accompanied  by  compensation  land  va\ues 

for  losses.     Here  Mr.  Brunhuber  points  out  that  there  should  be  through 

a  distinction  as  to  whether  loss  in  value  has  been  directly  due  to  governmental 

public  action  (under  certain  conditions,  where  the  erection  of  a  gas  act*on  distinct 

tank  or  a  slaughter-house  injures  the  neighborhood,  there  should  from  *hat  due 

...--,•':  to  other  causes. 

be  certain  compensation  for  the  detriment  of  the  property,  but  that 

apparently  should  be  made  by  suing  the  party  constructing  the  gas  Lan$  owner. 
tank  or  slaughter-house,  for  damages  to  the  property  injured).  ship  doesn't 

Since,  however,  as  he  asserts,  there  was  not  at  the  outset,  any  9^e  any  right 
right  to  have  bridges,  public  markets  or  theatres  in  one  neighbor-  to  pul}Uc 
hood,  any  claim  for  compensation  on  the  ground  of  their  removal 
is  to  be  rejected.  expense. 

47 


The  most  important  objection  is  the  third — that  the  tax  will  be 
shifted  from  seller  to  buyer,  and  will  serve  not  to  lower  the  value 
of  land,  but  to  increase  it. 

Now  every  check  on  land  speculation  tends  to  lower  prices.  This 
effect  is  the  greater,  the  higher  the  percentage  of  the  tax  and  the 

The  increment    greater  faQ  amount  of  cash  which  consequently  must  be  furnished. 
tax  is  the  „„  „      ,  .,  .,  *.  .  ,     . 

specific  remedy  While  the  details  necessarily  vary  according  to  the  special  circum- 

against  land        stances  of  the  several  cities,  the  value  raising  effect  of  the  ordinary 

speculation,         taxes  on  monopoly  of  real  estate  is  paralyzed  by  it  under  the  modern 

conditions  of  speculative  buying.     It  is  obvious  that  an  increment 

tax,  since  it  opens  the  prospect  that  a  large  part  of  the  increased 

gains  will  be  appropriated  by  the  community,  stands  in  the  way  of 

artificial  rise  in  rents  and  in  real  estate  value.    A  substantial  and 

rapidly  progressive  tax  of  this  sort  hence  tends  to  keep  down  the 

price  of  land. 

The  possibility          None  the  less,  something  more  is  to  be  said.    It  is  to  be  admitted 

of  shifting  the    that  sometimes  there  is  such  a  demand  for  land  that  there  is  a  pos- 

land  increment      .,.,.,         P     ,.-.,.  ,  . 

tax  must  be        sloihty  of  shifting  the  increment  tax  to  the  ground   rent  and  so 

met  by  land        causing  great  economic  evils.  This  possibility  must  not  be  neglected 
reform.  by  the  warmest  advocates  of  the  tax,  the  less  so  because  the  means 

of  obviating  it  are  at  hand.  These  are  to  be  found  in  a  firm  policy 
of  land  reform.  The  increment  tax  has  been  effective  in  keeping 
land  values  down  precisely  where  it  has  been  accompanied  by  action 
in  this  direction. 

The  yield  from         It  should  also  be  noted,  on  the  financial  side,  that  the  yield  of 
land  incre-          taxes  of  this  sort  is  likely  to  be  variable.   No  doubt  the  yield  is  likely 

**  tO  increase  on  the  whole>  but  not  at  any  regular  rate.  The  local 
bodies  (and  the  Senate)  must  take  this  probability  of  fluctuation 
into  account,  and  must  make  use  only  of  an  average  ascertainable 
over  a  longer  period  or  accumulate  the  funds  for  some  specific 
purpose. 

Finally,  we  have  to  consider  the  effects  upon  land  reform.  All 
taxation  of  sites,  especially  of  site  gains,  works  toward  such  reform. 
I  have  already  indicated  why  the  increment  tax  will  serve  to  check 
speculation  and  to  lessen  the  price  of  land.  Every  tax  upon  ground 
rents  tends  to  lessen  the  price  of  land ;  the  increment  tax  is  further 
beneficial  in  its  effect  on  the  ways  of  buying  and  selling  land.  Ac- 
cording as  the  earlier  or  later  stages  of  ownership  are  more  heavily 
affected'  this  tax  may  serve  to  stimulate  or  to  deaden  the  market 
heavy  and  pro-  for  land*  Mr'  Brunnuber  states:  "I  believe  that  the  tax  should 
gressive  land  begin  with  10  per  cent,  should  rise  rapidly  to  35  per  cent  (say 
increment  tax.  for  an  increase  of  value  of  50  per  cent),  while  a  tax  of  50  per  cent 

48 


is  entirely  reasonable  where  the  increase  in  value  is  100  per  cent 
or  more." 

Mr.  A.  C.  Pleydell  comments  on  a  land  increment  tax : 

"I  was  rather  surprised  to  hear  the  advocates  of  single  tax  speak  Mr.  Pleydell 
in  the  same  breath  of  taxing  the  unearned  increment  by  taxing  a  cer-   shows  the 
tain  amount  out  of  the  value  of  land  at  the  time  of  sale.     All  attempts   difficulty  of 
to  deal  with  the  selling  values  of  land  in  this  way  are  dealing  with    estimating  real 
what  in  one  sense  is  legal  fiction.     The  only  reason  land  has  value  at   land  increment 
all  is  that  you  can  get  a  certain  rental  out  of  it.     If  you  keep  people   if  iand  values 
from  collecting  rents  you  destroy  values.     Now,  how  are  you  going  to   are  heavily 
tax  the  unearned  increment  which  disappears  wherever  you  increase  a   taxed. 
tax  on  the  rental  value,  is  a  problem  I  have  not  yet  been  able  to  under- 
stand.    It  is  interesting  to  see  how  that  would  work  out.     A  man  pays 
a  certain  amount  of  money  for  his  land  based  upon  the  estimated  net 
return,  but  if  he  is  deprived  of  a  certain  amount  of  his  net  return  by 
an    increase    in    the    annual    tax,    the    land    will    have    its    selling    value 
reduced.     The  intricacies  would  amuse  one.     And  if  you  add  a  50  per 
cent  tax  on  the  unearned  increment  to  the  total  tax  upon  the  annual 
value  of  the  land,  based  on  the  selling  value  of  the  land  in  a  lump  sum, 
it  certainly  would  be  a  grinding  between  millstones." 


CHAPTER  V. 

Economic  Reasons   for  Taxing    Land   Values 

Heavily 

The  brief  survey  of  some  results  of  the  present  system  of  taxing 
buildings  at  the  same  rate  as  land  has  shown  the  complexity.  The 
bill  introduced  in  the  New  York  legislature  providing  for  making 
the  rate  of  taxation  on  all  buildings  one-half  the  rate  of  taxation 
on  all  land  was  endorsed  by  many  prominent  business  men,  bankers, 
manufacturers  and  professional  men.  In  a  statement  supporting 
this  bill,  entitled  "To  Free  Industry  and  Encourage  Enterprise  and 
Effort,"  they  assign  the  following  reasons  for  the  enactment  of 
the  bill : 

"The  proposition  to  make  the  tax-rate  on  all  buildings  half  the  tax-   Business  Men's 
rate  on  all  land  in  New  York  City  offers  an  important  measure  of  free-  statement  of 
dom  and  incentive  to  the  business  men,  manufacturers  and  constructors   economic 
of  buildings  in  the  city.     They  have  long  felt  and  expressed  the  desire   advantages  of 
for   relief   from   the  growing  burdens   of   taxes  on   business   premises,   halving  the 
factories  and  tenements — for  the  heavy  taxes  on  tenements  reflects  itself   tax-rate  on 
in  the  necessity  for  higher  wages.     Such  stimulation  of  business  enter-   buildings. 
prises  will  be  immediate  and  vital  as  soon  as  the  proposed  adjustment 
of  taxation  is  in  force.      To  secure  the  total  levy  upon  ordinary  real 
estate  in  1910,  in  New  York  by  taxing  land  double  the  rate  on  improve- 
ments, including  buildings  of  all  sorts,  the  rate  on  land  would  have  been 
$2.193  per  $100   of    assessed   value;   on   buildings,   $1.096  per   $100  of 
assessed  values. 

"In  addition  to  the  saving  in  taxes  amounting  on  different  classes 
of  buildings  to  from  one-sixth  to  one-quarter  of  the  usual  taxes,  the 
proposed  halving  of  the  tax-rate  on  buildings  will  have  three  distinct 
beneficial  effects  on  business  and  manufacturing. 

"ist.  It  will  bring  more  and  cheaper  land  into  the  market  for 
business  purposes. 

"2nd.  It  will  make  the  landowner  improve  his  land  with  buildings 
and  cause  competition  for  tenants,  thereby  decreasing  rents. 

"3rd.  It  will  make  the  landowner  and  not  the  lessee  pay  the  taxes, 
because  the  tax  on  land  can't  be  shifted  to  the  tenant,  and  the  tax  on 
buildings  usually  can. 

"We  therefore  recommend  to  business  men  this  halving  of  the  tax 
on  buildings  in  the  hope  that  they  will  consider  it  in  relation  to  their 
business  interests,  and  support  the  demand  that  energy  and  business  be 
encouraged  by  the  proposal  to  reduce  by  half  the  tax  burden  on  all 
improvements." 

SI 


Why  business 
shouldn't  be 
taxed  at  the 
same  rate  as 
land  values. 

A  tax  on  indus- 
try is  always 
shifted. 


Industry 
doesn't  yet 
bear  its 
own 
burdens. 

Industry  must 
pay  the  cost 
of  its 
accidents. 


Industry  must 
pay  fair 
wages. 


Industry 
taxed  will  be 
industry 
gone. 


Industry  must 

provide 

safer  working 

conditions. 


It  will  of  course,  be  asked,  "Why  should  industry  not  be  made 
to  bear  its  fair  share  of  the  cost  of  municipal  government  by  being 
taxed  at  the  same  rate  as  land  ?" 

The  reasons  are: 

1st.  A  tax  on  industry  is  shifted  to  the  consumer  or  laborer 
whenever  possible.  It  is  impossible  to  determine  exactly  who  pays 
a  tax  upon  business  but  the  tendency  is  inevitable  to  turn  it  over 
on  to  whomever  it  can  most  readily  be  shifted,  and  this  is  frequently, 
if  not  usually,  those  least  able  to  bear  it. 

2nd.  Industry  has  not  yet  begun  to  bear  its  own  burdens. 

There  is  a  country-wide  determination  that  business  shall  bear 
its  proper  burden  of  the  cost  of  industrial  accidents  and  industrial 
diseases. 

While  temporary  setbacks  to  this  popular  mandate  have  occurred 
in  a  few  states  through  crude,  or  worse,  court  decisions,  neverthe- 
less it  is  the  settled  determination  of  the  people  to  exempt  the  work- 
ers of  the  country  from  hardships  and  suffering  in  their  employ- 
ment due  to  conditions  over  which  they  have  no  control. 

Industry,  too,  has  not  paid  fair  wages  to  its  workers.  Labor 
has  been  the  last  fixed  charge  on  production,  while  an  enlightened 
public  opinion  is  now  demanding  that  it  shall  be,  if  not  the  first 
fixed  charge  on  industry,  at  least  equal  in  its  claim  to  that  of  the 
capital  invested.  To  pay  a  living  wage  under  present  conditions, 
industry  must  increase  its  payment  to  laborers  in  this  country  by 
hundreds  of  millions,  and  so  long  as  the  landowner,  as  well  as  the 
government,  is  permitted  to  tax  the  manufacturer,  this  will  con- 
tinue and  this  tax  will  be  shifted  in  large  measure  to  the  consumer. 

3rd.  Industry  taxed  will  remove  from  the  jurisdiction  of  the 
taxing  power,  because  industry  takes  risks  and  landowning  does 
not  in  the  same  sense  or  to  a  similar  extent. 

To  secure  factories  is  the  highest  ambition  of  most  growing 
cities,  evidenced  by  the  attractions  offered  new  factories  to  locate, 
such  as  exemption  from  taxes,  reduced  taxes,  free  sites,  free  water, 
water  power,  etc. 

4th.  Industry  must  provide  safer  conditions  for  workers  than  it 
has  hitherto.  Brutal  and  unhealthy  overcrowding  and  dangerous 
fire-hazards  exist  in  most  large  manufacturing  cities  of  the  country, 
the  remedying  of  which  will  involve  large  expenditures  by  manu- 
facturers. With  a  uniform  rate  of  taxation  on  land  and  buildings 
this  will  put  a  heavy  and  unjust  burden  upon  industry — which  can 
be  prevented  only  by  a  lower  tax-rate  on  buildings.  In  most  states 
250  cubic  feet  of  air  space  only  is  required  for  every  employee 


in  a  factory  during  the  day,  but  there  is  practically  no  means  of  en- 
forcing this  law  and  often  workers  are  so  crowded  that  only  150 
to  200  cubic  feet  of  air  space  is  afforded.    In  point  of  fact  as  much 
air  space  should  be  required  for  factories  as  for  tenements,  and  the 
requirement  for  tenements  in  this  country  varies  from  400  to  700 
cubic  feet  per  occupant.    On  a  conservative  estimate  many  manu- 
facturers in  large  cities  should  be  compelled  to  provide  at  least  Taxing 
double  the  amount  of  cubic  air  space  now  provided  as  well  as  to  ^™1^™9S  f™' 
furnish  fire  towers  connecting  or  party  walls  and  adequate  exits,  construct{on 
while  many  buildings  now  used  for  manufacturing  purposes  cannot  Of  such  safe 
by  any  structural  changes,  be  made  safe,  but  should  be  demolished,  factories 

5th.  Government  already  exercises  through  State  Departments  an(*  •***»•••* 
of  Labor,  the  Interstate  Commerce  Commission,   Public  Utilities  r 
Commissions,  etc.  much  closer  supervision  and  control  even  now  Comparative 

over  the  business  interests  of  the  country  than  over  the  landed  suPer<insion 

of  State 

Crests.  Departments 

Inadequate  as  is  admittedly  in  many  states  the  work  of  the  De-  Of  Labor, 

partment  or  Bureau  of  Labor,  nevertheless  their  functions  are  con-  the  Interstate 

stantly  enlarging  as  the  citizens  of  the  state  appreciate  the  need  Commerce 

for  standardizing  conditions  of  working  and  this  appreciation  ex-  Commission 

•*.      ir   •       i  1^-1  £   1    t.  -k  J-.L-  an&  Public 

presses  itself  in  laws  regulating  hours  of  labor,  sanitary  conditions   utmties 
of  factories  and  providing  for  arbitration  or  mediation  of  indus-  Commissions. 
trial  differences  or  disputes.    Thirty-four  states  and  the  Philippine 
Islands  now  have  such  a  bureau. 

The  Interstate  Commerce  Commission  has  unique  jurisdiction 
based  upon  the  police  rights  of  government  to  regulate  those  rela- 
tions which  cannot  be  determined  by  private  control  and  agreement 
any  more  satisfactorily  or  equitably  than  can  a  single  worker  in  the 
higgling  of  the  labor  market  ensure  for  himself  a  living  wage.  The 
right  of  this  Commission  to  review  rates  and  adjudicate  them, 
however  unfortunate  some  of  the  decisions  may  have  been,  is  never- 
theless the  revival  of  the  principle  accepted  by  the  fathers  of  the 
country  of  the  right  of  collective  supremacy  over  individual  caprice. 
The  exercise  of  that  right  was  in  abeyance  for  many  years  during 
which  the  motto  of  the  country  was,  as  Mr.  Herbert  Croly  states, 
"individual  aggrandisement  and  collective  irresponsibility,"  but  the 
national  disgust  and  apprehension  of  action  in  accord  with  that 
motto  is  complete  as  the  social  results  of  such  action  have  become 
apparent. 

The  creation  during  the  past  few  years  of  public  utilities  or  serv- 
ice commissions  in  seven  states  of  the  Union,  and  the  partial 
control  of  public  utilities  exercised  in  fifteen  other  states,  as  well 

53 


Landowners 
are  practically 
unregulated 
and  allowed 
to  prey  on 
business 
interests. 


High  taxation 
of  land  values 
will  release 
money  and 
reduce  interest 
charges. 


Money  invested 
in  municipal 
bonds  to  be 
released  by 
taxing  land 
values. 

Socialistic 
alternatives 
suggested  as 
substitute  for 
taxation  of 
land  values. 


as  the  fact  that  progressive  cities  such  as  Los  Angeles,  Kansas 
City  and  St.  Louis  have  created  similar  municipal  utilities  commis- 
sions, emphasize  the  fact  that  the  regulation  of  public  services  and 
utilities  by  competition  is  no  longer  sufficient  and  that  collective 
control  is  essential. 

In  many  respects  private  land  ownership  unregulated  is  more 
dangerous  than  public  utilities  companies  unregulated  since  the 
threat  of  competition  cannot  be  used  to  club  land  into  public  serv- 
ice instead  of  extortion  from  the  public.  Land  ownership  is,  however 
comparativley  unregulated;  the  chief  exceptions  being  build- 
ing regulations,  and  prohibition  of  the  use  of  land  for  public  nui- 
sances. Landowners  alone  have  the  right  to  "tax  what  the  traffic 
will  bear,"  even  the  injustice  of  our  tariff  being  mollified  by  giving 
manufacturers  the  right  to  levy  only  a  specific  or  ad  valorem  tax 
upon  the  public  consuming  their  products.  Heavy  taxation  of  land 
values  is  the  most  direct,  cheapest  and  effective  method  of  regulat- 
ing the  use  of  land,  comparable  to  the  regulative  control  exercised 
in  other  fields  by  the  governmental  agencies  enumerated. 

6th.  Adequate  taxation  of  land  values — as  will  be  shown  later 
in  discussing  the  fiscal  advantages  of  taxing  land  values — will  re- 
lease large  sums  of  money  for  other  purposes  and  tend  to  reduce 
interest  rates.  Prof.  E.  R.  A.  Seligman  in  his  "Principles  of  Taxa- 
tion" states  with  reference  to  the  claim  of  single  taxers  that  more 
buildings  would  be  constructed  if  land  values  were  heavily  taxed 
or  taxes  on  buildings  abolished,  that  there  is  not  any  general  fund 
lying  around  loose  seeking  investment  in  buildings,  and  that  no 
such  fund  can  be  conjured  up.  If,  however,  New  York  City  should 
pay  its  debts  as  it  goes  along  or  even  a  large  share  of  them,  and 
should  issue  only  $31,000,000  of  corporate  stock  a  year  instead  of 
$71,000,000,  meeting  the  $40,000,000  additional  annual  expenditures 
by  taxing  land  values,  it  is  apparent  that  $40,000,000  would  be  seek- 
ing investment. 

The  $2,000,000,000  of  municipal  debt  of  the  one  hundred  and 
fifty-eight  cities  having  in  1908  a  population  of  30,000  or  over  as 
gradually  paid  off  would  naturally  be  seeking  other  fields  of  invest- 
ment, and  very  few  of  these  cities  pay  over  4l/2  per  cent  interest, 
while  many  issues  of  corporate  stock  net  only  3^  to  4  per 
cent.  A  curious  illustration  of  the  alternatives  which  will  be  sug- 
gested to  prevent  taxation  of  land  values  is  found  in  the  coincidence 
that  while  preparing  this  book  the  writer  received  a  letter  from  a 
prominent  real  estate  operator  in  Brooklyn  deploring  the  high  rate 
of  interest  charged  builders,  especially  in  Brooklyn,  and  suggesting 


54 


that  the  state  or  county  should  borrow  money  at  4  per  cent  and 
loan  it  to  builders  at  4^  per  cent  (charging  J^  per  cent  for  the 
risk  and  expenses)  in  the  hope  that  the  competition  of  lower  rates 
of  interest  would  reduce  the  present  interest  and  commission  charges 
to  builders,  amounting  to  7  per  cent  to  8  per  cent.  This  is  a  novel 
suggestion  of  adding  to  the  heavy  burdens  upon  the  poor,  of  the 
state  and  county  expenses  involved  in  the  present  systems  of  taxa- 
tion for  state  and  county  purposes,  so  as  to  encourage  land  specula- 
tion, instead  of  taxing  land  values  sufficiently  so  as  to  release  mil- 
lions of  capital  now  loaned  to  the  city  which  would  reduce  rates  by 
natural  economic  laws  of  supply  and  demand. 

The   suggestion   amply  demonstrates,  however,  that    economic  Economic 
laws  when  their  working  is  not  hampered  by  economic  injustice  forces  will  be 
are  a  sufficient  corrective  of  many  social  evils.  It  is,  of  course,  much  released  f°r 
easier  and  more  profitable  to  loan  large  sums  to  the  city  secured  *°J^ 
by  the  city's  credit  which  in  turn  is  based  upon  the  industry  of  the  taxation  of 
entire  population,  than  to  loan  money  in  sums  of  $1,000.00  to  $10,-  land  values. 
ooo.oo,  but  when  cities  stop  borrowing  money  so  prodigally  the  nat- 
ural result  will  be  a  lower  rate  of  interest  both  to  cities  and  to  other 
borrowers.    It  may  be  noted  in  passing  that  European  and  British 
municipalities  borrow  money  at  3^    and  even   3  per  cent. 


55 


CHAPTER  VI. 

Some  Fiscal  Reasons  for  Taxing  Land  Values 

Heavily 

Adam  Smith  enumerated  canons  of  taxation  which  have  stood 
the  test  of  many  years.  Among  the  most  important  of  his  canons 
is  the  first  fiscal  reason  for  taxing  land  values  heavily.  Heavy  taxa- 

"The  patrimony  of  the  state  must  not  be  impaired,"  while,  too,  tion  °f  land 

.  i  i  „  values  does  not 

"taxation  must  be  equal. 


This  is  more  generally  phrased  to-day,  "Don  t  tax  anything  that  patrimony  of 
you  want  to  keep  or  anything  that  can  run  away."    Admittedly  land  the  state  and  is 
can't  run  away,  nor  can  its  amount  or  usefulness  be  lessened  by  a«  equal  tax. 
taxation,  nor  its  uses. 

Revenue  from  present  sources  in  cities  in  this  country  and 
abroad,  as  well  as  from  many  suggested  sources,  tends  to  drive  in- 
dustry out  of  a  city  and  state  and  to  reduce  the  taxable  base,  or 
to  involve  a  larger  expenditure  by  the  municipality. 

Since  the  largest  and  most  important  levy  in  most  American 
cities  is  upon  general  property  a  consideration  of  the  fiscal  effects 
of  taxing  buildings  at  the  same  rate  as  land  must  be  considered. 
The  right  of  dependent  citizens  to  support  by  the  municipalities  in 
which  they  have  a  legal  settlement  is  generally  recognized.  It  is 
equally  generally  recognized  that  it  is  more  expensive  to  care  for 
a  patient  in  a  hospital  than  in  a  home,  to  try  to  patch  up  a  broken- 
down  constitution  than  to  keep  the  individual  in  good  health.  Rev-  Revenue  from 

enue  therefore,  from  taxes  upon  buildings  which  as  has  been  shown   taxes  on  bmld~ 
..,.,.  .  ......  r       M      twas  involves 

are  shifted  upon  the  tenant  even  if  he  is  trying  to  support  a  family  incommensu, 

upon  a  deficit,  and  from  taxes  which  require  him  to  pay  more  rent   rate  dty 

thereby  reducing  his  vitality  through   deprivation,  and  hence  his   expenditures 

earning  capacity,  is  a  very  expensive  revenue  because  it  compels 

an  expenditure  by  the  city  of  many  fold  the  total  receipts  from  such 

taxes  to  remedy  the  suffering  and  injury  caused  thereby.    The  se- 

curing of  revenue  from  such  taxes  on  buildings  which  lessens  the 

supply  and  increases  the  cost  of  good  ones  while  increasing  the 

profits  from  old  ones  is  manifestly  short-sighted.   Waiving  all  con- 

siderations of  humanity  and  economy  to  be  effected  in  industry, 

from  a  purely  fiscal  point  of  view  the  city  can't  afford  such  extrava- 

gance  as  paying  $5.00  for  hospitals  and  care  of  the  poor  to  collect  property  is 

$1.00  from  taxing  houses.  expensive. 

57 


Former  Commissioner  of  Public  Charities  in  New  York,  Hon. 
Robert  W.  Hebberd  states  the  case  not  only  for  New  York,  but  in 
principle  for  every  American  city  when  he  said: 

"Congestion  of  population  is  contributing  very  largely  to  the 
$10,000,000  a  year  which  New  York  spends  on  her  departments  for  the 
prevention  and  the  cure  of  disease." 

High  rents  are  a  most  fundamental  cause  of  congestion  of  popu- 
lation and  room  overcrowding.  The  same  bad  fiscal  effect  follows 
the  taxing  of  buildings  used  for  commercial  and  manufacturing 
purposes. 

The  total  receipts  of  the  one  hundred  and  fifty-eight  cities  of  the 
United  States  which  in  1908  had  a  population  of  30,000  or  over, 
from  special  property  and  business  taxes,  business  licenses  (ex- 
clusive of  liquor  licenses)  and  permits  amounted  to  $20,764,643,  or 
about  one-twenty-third  of  the  total  revenues  of  such  cities  in  that 
year.  Such  taxes  militate  against  business  and  at  the  same  time 
against  the  city's  best  fiscal  interests. 

The  proposal  to  tax  foreign  business  corporations  or  individuals 
doing  business  in  a  city,  but  living  in  an  adjoining  state  is  a  slightly 
different  proposition,  but  nevertheless  tends  to  discourage  business  in 
the  city  levying  such  a  tax. 

Taxing  per-  New  York  City's  system  of  taxing  personal  property  and  build- 

sonalty  and         •         ^      Driven  practically  every  large  factory  making  heavy  goods 
buildings  drives  .  .  *    ,         •  «  1     vr         T  on.- 

out  factories       suc"  as  macnmery  out  of  the  city  and  over  to  New  jersey.      This 

and  reduces  is  fiscal  suicide. 

the  city's  tax-  Heavy  taxation  of  franchises  is  suggested,  but  in  so  far  as  cor- 
able  base.  porations  holding  municipal  franchises  are  limited  to  a  certain  net 
Taxing  fran-  return  any  tax  on  such  franchises  merely  tends  to  increase  rates  and 
chises  of  reduce  the  grade  of  service,  while  cheap  rates  and  rapid  service  are 
companies  both  essential  in  American  cities — pending  the  distribution  of  fac- 
ie; ose  profits  torjes — to  improving  the  living  conditions  of  workers  therein, 
and  charges 

are  regulated  ^  tax  uPon  automobiles  for  instance  to  take  an  illustration  of 

hits  poor  manifestations  of  "conspicuous  consumption"  cannot  be  shifted,  but 

people.  if  heavy  would  doubtless  reduce  the  number  of  persons  using  auto- 
mobiles and  hence  the  demand  for  cars,  chauffeurs,  oil,  garages, 
etc.,  with  all  the  labor  employed  in  these  lines  of  production,  while 

A  graduated  being  a  heavy  tax  upon  industry  in  which  they  are  extensively  used 

habitation  tax  and  hence  tending  to  drive  factories  out  of  the  city  levying  such 

will  require  taxes 

mor I  oi°thT  ^e  ^ew  York  Special  Tax  Commission  which  reported  to  the 

C03t  Of  Legislature  in  1907  recommended  a  graduated  habitation  or  occu- 

government.        pancy  tax,  as  a  substitute  for  the  personal  property  tax,  to  be  levied 

58 


upon  homes  or  mansions  based  upon  the  assessed  valuation  of  land 
and  buildings,  but  with  a  sufficiently  high  exemption  so  as  not  to 
affect  those  who  have  only  a  moderate  income. 

Similarly  a  progressive  tax  upon  skyscrapers  or  buildings  which  ^  progressive 
exceed  a  certain  cubage  or  volume  is  entirely  feasible  and  not  incon-  tax  on     •*" 
sistent  with  the  taxation  of  land  values  since  a  skyscraper  is  in  the  ^stfad  as  a 
nature  of  a  special  privilege  absorbing  much  of  the  capacity  of  both  franchise  lax. 
streets  and  other  means  of  transit  which  are  both  supplied  at  public 
expense.    A  tax  upon  excess  volume  of  buildings  is  therefore  only  a 
species  of  franchise  tax  for  a  special  privilege  over  the  charges  for 
which   neither   city,   state   nor   federal   government   exercises   any 
supervision  or  control. 

Taxes  on  dogs,  carriages,  etc.,  are  valuable  as  a  means  of  driving 
them  out. 

A  too  heavy  inheritance  tax,  as  the  experience  of  New  York 
State  during  the  past  year  has  plainly  demonstrated,  drives  capital 
out  of  a  state,  and  while  from  a  moral  point  of  view  this  should  not 
deter  a  state  from  imposing  a  right  tax — it  is  a  fiscal  mistake. 

A  progressive  income  tax  for  municipal  purposes  would  also  tend 
to  drive  wealth  out  of  a  city,  while  an  income  tax  is  manifestly  unjust 
and  an  inheritance  tax  only  slightly  less  so  which  fails  to  distinguish 
between  a  lazy  and  an  earned  income. 

On  the  other  hand  the  heavy  taxation  of  land  values  is  a  stimu- 
lus to  the  improvement  of  land,  thereby  increasing  its  utilization  and 
the  taxable  base  of  the  city.  A  heavy  tax  on  land  values  increases 
the  patrimony  of  the  state  and  is  equal. 

2.  The  tax  upon  land  cannot  ordinarily  be  shifted,  and  a  tax  ^  tax  on 
which  can  be  shifted,  and  is  hence  uncertain,  is  always  bad  from  a  land  can>t* be 
fiscal  point  of  view. 

Starting  with  Adam  Smith  nearly  all  economists  are  agreed  that 
a  tax  on  land  cannot  be  shifted  as  the  following  quotations  show  : 

"Though  the  landlord  is  in  all  cases  the  real  contributor,  the  tax   Adam  Smith. 
is  commonly  advanced  by  the  tenant,  to  whom  the  landlord  is  obliged 
to  allow  it  in  payment  of  the  rent."— Adam  Smith,  "Wealth  of  Nations," 
Book  V.,  Chapter  II.,  Part  2,  Art.  I. 

"A  tax  on  rent  would  affect  rent  only;  as  it  would  fall  wholly  on  Ricardo. 
landlords,  and  could  not  be  shifted.  The  landlord  could  not  raise  his 
rent,  because  he  would  have  unaltered  the  difference  between  the 
produce  obtained  from  the  least  productive  land  in  cultivation,  and  that 
obtained  from  land  of  every  other  quality." — Ricardo,  "Principles  of 
Political  Economy  and  Taxation,"  Chapter  X.,  Section  62. 

"A  tax  on  rents  falls  wholly  on  the  landlord.    There  are  no  means 
by  which  he  can  shift  the  burden  upon  any  one  else.    ...    A  tax  on 

59 


Mill. 


Thorold 
Rogers. 


Seligman. 


Fillebrown. 


Wall  Street 
fears  the  taxa- 
tion of  land 
values. 


Land  can't  be 
hidden. 


A  land  tax 
is  cheaply 
collected. 


rent,  therefore,  has  no  effect  other  than  its  obvious  one.  It  merely 
takes  so  much  from  the  landlord  and  transfers  it  to  the  State." — John 
Stuart  Mill,  "Principles  of  Political  Economy,"  Book  V.,  Chapter  III., 
Section  2. 

"The  power  of  transferring  a  tax  from  the  person  who  actually 
pays  it  to  some  other  person  varies  with  the  object  taxed.  A  tax  on 
rents  cannot  be  transferred.  A  tax  on  commodities  is  always  trans- 
ferred to  the  consumer." — Thorold  Rogers,  "Political  Economy,  2nd 
edition,  Chapter  XXL,  p.  285. 

"The  incidence  of  the  ground  tax,  in  other  words,  is  on  the  land- 
lord. He  has  no  means  of  shifting  it;  for,  if  the  tax  were  to  be  sud- 
denly abolished,  he  would  nevertheless  be  able  to  extort  the  same  rent, 
since  the  ground  rent  is  fixed  solely  by  the  demand  of  the  occupiers. 
The  tax  simply  diminishes  his  profits." — E.  R.  A.  Seligman,  "Incidence 
of  Taxation,"  pp.  244,  245. 

As  Mr.  C.  B.  Fillebrown  states,  "Ground  rent  is  as  a  rule,  'all  the 
traffic  will  bear/  that  is,  the  owner  gets  all  he  can  for  the  use  of  his 
land,  whether  the  tax  be  light  or  heavy.  Putting  more  tax  upon  land 
will  not  make  it  worth  any  more  for  use,  will  not  increase  the  desire 
for  it  by  competitors  for  its  tenancy,  will  not  increase  its  market 
value." 

Wall  Street  voices  its  realization  of  this  fact  and  of  the  basis 
of  large  fortunes  in  land  values  in  the  following  statement  in  "Mar- 
ket Letter"  issued,  August  2ist,  1911,  by  Mr.  Byron  W.  Holt: 

"While  the  land-tax  value  may  be  an  excellent  device  for  raising 
city  revenue,  it  will,  if  carried  far  enough,  work  havoc  not  only  with 
investors  in  real  estate  mortgages,  but  with  investors  in  many  railroad 
and  industrial  stocks,  the  value  of  which  comes  largely  from  real 
estate." 

3.  Land  cannot  be  hidden  as  can  other  sources  of  revenue,  and  as 
its  value  is  always  increasing  automatically,  it  is  a  certain  and  definite 
source  of  income — which  can  be  most  readily  and  cheaply  collected. 

The  assessed  value  of  land  in  a  city  can  be  more  definitely  ascer- 
tained than  can  any  other  conceivable  form  of  city  revenue. 

Even  making  allowance  in  valuing  buildings  for  age  and  de- 
preciation, it  is  difficult  to  arrive  at  their  fair  valuation.  Attempts 
to  assess  personal  property  result  in  raising  a  race  of  liars  instead 
of  raising  revenue. 

The  sum  that  will  be  yielded  from  licenses  for  business,  trad- 
ing, bootblack  stands,  lodging  houses,  etc.,  is  always  an  estimate. 
Most  cities  in  the  United  States  recognize  this  fact  and  estimate 
the  amount  to  be  raised  from  all  other  sources  except  the  tax  on 
real  estate  and  personalty  and  then  upon  the  ascertained  assessed 


60 


value  thereof  determine  the  tax-rate  to  raise  the  revenue  needed 
to  meet  the  city's  expenditures. 

The  cost  of  collecting  any  other  tax  than  the  tax  on  land  is 
very  much  more  expensive,  since  it  involves  not  only  a  large 
amount  of  bookkeeping  but  as  well  detective  work  in  ascertaining 
or  guessing  at  wealth. 

4.  Taxation  of  land  values  is  an  adequate  source  of  revenue 
for  every  city  in  America. 

If  a  fair  rate  of  taxation  on  land  were  not  sufficient  to  meet 
all  legitimate  municipal  expenditures  there  would  be  less  point  in 
arguing  for  the  adequate  taxation  of  land  values. 

As  has  been  stated  earlier  relatively  few  cities  separate  land 
and  improvement  values,  but  the  conditions  in  those  which  do 
sufficiently  prove  the  potentiality  of  this  source  of  municipal  rev- 
enue. 

NEW  YORK  CITY. 

The  total  assessed  value  of  land  in  New  York  City  in  1910, 
exclusive  of  "Real  Estate  of  Corporations"  and  "Special  Fran- 
chises" was  $4,001,129,651  while  the  total  levy  upon  land  and 
buildings  for  all  municipal  and  county  purposes  was  $115,080,- 
377-79- 

The  total  ordinary  budget  of  the  city,  that  is  the  sum 

appropriated  by  the  city  for  current  expenses,  was $157,773,145-53 

The  "Corporate  Stock"  warrants  paid  amounted  to 71,747,316.46 

The  Special  Revenue  Bond  warrants  amounted  to 7,396,455-75 


That  is,  these  total  municipal  expenditures  were $236,916,917.74 

Other  levies  were,  however, 
On  Special  Franchises  and  Real  Estate  of 

Corporations    $9,804,795.50 

On  Personal  Property 6,589,809.77 

All    other    sources    (estimated),    including 

revenues   of   Bank  Tax,   Mortgage  Tax, 

Excess  of  Excise  Tax,  State  School  Fund 

and  Previous  Appropriations 32,030,989.45 


_      ,  The  rate  to 

Total    48,425,594.72  meetallof 

Amount  to  be  raised  by  taxation  on  land  alone $188,491,323.02  d't  r 

It  will  thus  be  seen  that  to  raise  the  total  expenditures  of  the  fpl°  ™ould 

.          „  .  ,  have  been  $5.90 

city  m  1910,  including  corporate  stock  and  special  revenue  bond  per  $IOQ  Oj 

warrants  paid,  by  taxing  land  values  alone  the  rate  would  have  assessed  land 

been  only  $5.90  per  $100.00  of  assessed  value  which  would  not  be  values. 

61 


entire  confiscation  of  ground  rent  since  i  per  cent  to  2  per  cent 
would  still  probably  have  been  made  by  the  owners  of  the  ground 
rent,  the  landowners.  This  is  "single  tax"  and  paying  all  the  city's 
expenses  by  a  tax  upon  land  values  alone. 

It -should  be  noted,  however,  that  land  in  New  York  was  not 
assessed  at  selling  price  in  1910  and  its  assessed  valuation  in  1911 
was  nearly  $555,000,000  greater,  so  the  tax-rate  on  full  value 
would  have  been  much  less.  "Real  Estate  of  Corporations"  and 
"Special  Franchises"  also  are  excluded  from  heavier  taxation  since 
reduction  in  charges  to  the  consumer  by  any  corporation  whose 
charges  and  profits  are  determined  and  limited  by  a  Public  Serv- 
ice Commission  is  more  important  than  securing  taxes  to  be  shifted 
to  the  ultimate  consumer.  Robbing  Peter  to  pay  Paul  is  an  out- 
grown game  when  governmental  control  and  regulation  is  estab- 
lished. 

To  raise  the  total  expenditures  in  1910  of  New  York  City, 
exclusive  of  the  revenue  from  personal  property  and  taxes  on 
"Real  Estate  of  Corporations"  and  "Special  Franchises"  by  tax- 
ing land  values,  would  have  required  a  tax-rate  of  only  $4.78  per 
$100.00  of  assessed  value,  while  to  have  raised  the  so-called  "bud- 
get" exclusive  of  the  Corporate  Stock  budget  and  the  issues  of 
special  revenue  bonds,  by  a  tax  on  land  without  taxing  buildings 
but  taxing  personal  property,  banks,  mortgages,  etc.,  as  was  done 
would  have  required  a  tax-rate  of  only  $2.87  per  $100.00  of  as- 
sessed value.  The  important  point  which  has  been  fully  established 
is  that  a  much  higher  tax-rate  can  be  safely  imposed  on  land  than 
at  present  and  all  taxes  on  buildings  can  be  abolished  without 
in  any  way  "confiscating"  ground  rents,  and  it  should  be  noted 
that  this  is  not  the  "single  tax." 

BOSTON. 

The  figures  prepared  by  Mr.  C.  B.  Fillebrown  for  Boston  in 
1907  are  so  graphic  and  convincing  that  we  reproduce  them.  He 
found  that  125  pieces  of  real  estate  in  various  sections  of  the  city 
were  sold  at  prices  averaging  one-fifth  higher  than  their  assessed 
valuation,  indicating  that  they  were  assessed  at  five-sixths  of  their 
true  value,  and  concludes. 

"Based  upon  the  foregoing  ratio,  the  following  conservative  estimate  of 
the  gross  land  value  of  Boston  is  submitted  for  scrutiny  and  criticism : 

62 


A  CONSERVATIVE  CALCULATION  OF  BOSTON'S 
GROUND  RENT. 

If  the  assessed  valuation*  of  Boston's  land  for  1907,  which 
is  in  round  numbers $653,000,000 

Is  five-sixths  of  its  selling  value,  then  the  addition  of 
one-fifth  130,600,000 


Would  give  us  as  the  net  selling  value $783,600,000 

Adding  to  this  the  capitalized  value  of  the  amount  of  tax 
now  on  the  land,  $15.90  per  thousand  on  $653,000,000, 
or  $10,382,000  at  twenty  years'  purchase 207,600,000 


Would  give  as  the  true  capitalized  ground-rental  value $991,200,000 

Add  moderate  estimate  for  franchises,  say 108,800,000 


And  we  should  have  as  a  basis  of  assessment  under  the 
single  tax  a  total  capitalized  ground-rental  value  of  at 
least  $1,100,000,000 

At  5  per  cent  this  would  indicate  for  Boston  a  ground 
rent  of  55,000,000 

Or  considerably  more  than  double  the  total  taxes  of  Boston.t" 

Putting  this  in  another  way:    To  secure  the  total  levy  of  $20,-  Boston's  city 
886,335  on  land,  buildings  and  personalty  by  taxing  land  values  on  and  state  iax  in 
the  basis  of  the  assessment   at  five-sixths  of  the  actual  value,  would  ^^  ^"uired 
have  required  a  tax-rate  on  land  of  $3.19  per  $100.00  of  assessed  a  tax-rate  on 
values,  while  on  the  real  value  of  land,  the  tax-rate  would  have  full  land  values 
been  $2.66.  of  only  $2.66 

per  $100. 

*  The  official  figures  are  : 

Valuation.  Rate.  Tax. 

Land    $652,995,300  $15.90  $10,382,700 

Buildings    417,869,400  15.90  6,646,200 

Personalty    242,606,857  15.90  3,857,435 


$1,313,471,557  $20,886,335 

t  Boston's  income  from  taxation  in  1907  was : 

Land  values   $10,382,628 

Buildings  and  other  improvements 6,644,212 

Personal  estate  3,857,449 

Polls    369,066 

Corporation  taxes    1,087,793 

Liquor  licenses   1,079,585 


Boston's  total  city  tax  (including  state  tax) $23,421,542 

63 


Chicago  could 
in  1911  have 
raised  its 
budget  by  a 
$4.88  tax-rate 
on  full  land 
values. 


CHICAGO. 

The  assessed  land  value  of  Chicago  in  1911  is  $395,911,111, 
but  Assessments  are  only  about  one-third  of  true  value,  so  that  the 
full  value  is  $1,187,733,334. 

The  total  municipal  budget  in  Chicago  in  1911  is  $58,054,000, 
To  have  raised  this  total  budget  by  a  tax  on  land  alone  would 
have  required  a  rate  of  only  $4.88  per  $100.00  of  full  assessed 
value,  though  the  rate  on  the  valuation  used  would  have  been 
$14.66.  Chicago's  net  bonded  indebtedness  in  1910  was  $30,897,000. 
Naturally  the  "  full  value  "  of  land  is  a  relative  matter,  depending 
upon  many  factors,  and  the  estimate  that  the  full  land  values  of 
Chicago  were  three  times  the  assessed  valuation  may  be  a  little 
high;  but  the  important  point  is  that  even  on  the  basis  of  the 
assessed  value  of  $395,911,111,  the  total  tax-rate  to  raise  Chicago's 
budget  for  1911  by  taxing  land  alone  would  have  been  $14.66. 


BUFFALO. 

The  assessed  value  (full)  of  land  in  1910  was $169,340,615 

The  assessed  value  (full)  of  improvements  in  1910  was 165,462,150 


Total    $334,802,765 

The  city  budget  in  1910  was  $7,704,137.03. 

To  have  raised  the  total  municipal  budget  by  a  tax  upon  land 
values  alone  would  have  required  a  tax-rate  of  only  $4.55  per 
$100.00  of  full  assessed  value,  while  to  raise  the  actual  levy  upon 
land  and  buildings  for  all  purposes,  amounting  to  $7,332,180.55, 
would  have  required  a  tax-rate  of  $4.33  upon  land. 

The  net  bonded  debt  of  Buffalo  in  1910  was  $22,168,128.58, 
while  the  total  principal  received  from  sale  of  bonds  during  the 
year  amounted  to  $3,635,241.89. 


OMAHA,    NEBRASKA. 

The  assessed  value  of  land  in  Omaha  in  1910  was $12,218,095 

The  assessed  value  of  buildings 12,723,471 


Total    $24,941,566 

Both  land  and  buildings  are  assessed,  however,  at  anly  one- 
fifth  of  their  full  value,  and  the  tax-rate  on  both  for  city  pur- 
poses in  1910  was  $6.29  per  $100.00  of  assessed  value,  the  tax  yield 

64 


being  $1,568,824.50.     To  raise  the  levy  by  taxing  land  only  the 
rate  would  have  been  per  $100.00  of  full  assessed  value  only  $2.57. 

WORCESTER,  MASSACHUSETTS. 

The  full  fair  value  of  land  in  Worcester  in  1910  was $47,032,750 

The  full  fair  value  of  buildings 63,414,450 


Total    '. $i  10,447,200 

The  levy  on  land  and  personalty  was  $1,971,838.06,  and  to 
raise  this  by  taxing  land  values  alone,  the  tax-rate  would  have 
been  $4.19. 

WASHINGTON,  D.  C,  (City  and  County.) 

The  assessed  value  of  land  in 
1910  was  $151,711,966 ;  real  value,  $227,567,949 

The  assessed  value  of  improve- 
ments was  133,441,805 ;  real  value,  200,162,707 


Total  assessed  value  in  1910  was...  $282,153,771;  real  value,  $427,730,656  Washington 

The  total  real  estate  tax  for  the  fiscal  year  ending  June  3Oth,  could  have 

1910,  was  $4,277,306.57  and  the  personal  tax,  $1,007,022.41 ;  total  raised  m  I9I° 

$5,284,328.98.     To  have  raised  this  sum  the  tax-rate  upon  the  full  ^ndbttildings 

value  of  land  would  have  been  $2.33  per  $100.00  of  full  assessed  and' personalty 

land   value,   while   the   actual  tax-rate   upon   land,   buildings   and  by  a  $2.33  tax- 

personalty   was  only  $1.50  upon  a  two-thirds    valuation:  rate  on  full 

land  values. 

SPRINGFIELD,  MASSACHUSETTS. 

The  assessed  full  value  of  land  in  1910  was $48,704,680 

The  assessed  full  value  of  improvements  in  1910  was 46,279,080 


Total    $94,984,660 

The  municipal  budget  in  1910  was  $1,830,420. 

To  raise  this  budget  by  taxing  land  alone  would  have  required 
a  tax-rate  of  only  $3.76  per  $100.00  of  assessed  value,  instead  of 
the  actual  tax-rate  of  $1.58. 

The  assessed  value  of  land  increased  from  1910  to  1911  by 
$3,407,080  or  almost  exactly  7  per  cent. 

KANSAS  CITY,  MISSOURI. 

In  1910  the  assessed  land  value  was $60.355.420 

The  assessed  value  of  buildings  was 49,614,480 

The  total  net  municipal  expenditures  were  only  $3,091,901.11, 
and  to  raise  this  sum  the  tax-rate  on  assessed  land  values  alone 
would  have  been  $5.12  per  $100.00.  Land  in  Kansas  City  is,  how- 

65 


ever,  assessed  for  only  15%  to  40%  of  its  real  value,  and  taking 
even  the  conservative  figure  of  50%,  the  tax-rate  on  full  land  values 
to  meet  the  city's  budget  would  have  been  only  $2.56.  The  actual 
tax-rate  on  all  property  in  the  city  is  $1.25  per  $100.00  of  assessed 
value,  while  a  25c  tax-rate  is  levied  on  land  values  alone  for  park 
maintenance. 

Land  values  While  data  is  given   for  only  a  few  cities,   it  is  evident  that 

are  an  adequate  ajj  ^e  revenue  now  raised  by  taxing  land,  buildings  and  personal 
source  of  muni-  .  .  .  •     _*  *  -111  1  --i 

..   ,  property  could  be  raised  by  taxing  land  values  alone  without  ap- 

cipal  revenue       r     r      j  j  r 

in  American        proximating  confiscation.     It  is  equally  patent  that  in  most  cities 

cities.  merely  to  make  the  rate  of  taxation  on  buildings  and  personal 

Cities  should      ProPertv  one-half  the  rate  of  taxation  on  land  without  increasing 

include  many      municipal  expenditures  to  meet  the  city's   full  social  obligations, 

deferred  and  without  paying  by  current  taxation  for  many  public  improve- 

payments  in        ments  now  paid  for  by  long  term  bonds,  will  not  enable  the  city 

annual  budgets.  to  secure  anv  material  proportion  of  the  ground  rent  now  taken 

by  the  landowners.    That  this  must  be  taken  gradually  is  no  more 

apparent  than  that  the  alternative  to  such  adequate  taxation  of 

land  values  in  order  to   enable  the  city  to  secure  these  ground 

rents,  is  municipalization  of  land. 

If  6  per  cent  net  is  now  considered  a  fair  return  upon  land 
values,  a  tax-rate  of  2  per  cent  while  the  property  yields  8  per 
centy — or  should  yield  8  per  cent, — to  be  divided  between  the  city 
and  the  landowner, — is  too  low  a  tax-rate.    There  is  a  grim  but 
dire  irony  in  the  fact  that  the  constitution  of  New  York  state  lim- 
its the  tax-rate  for  municipal  purposes  to  $2  on  every  $100.00  of 
Six  per  cent       assessed  value  exclusive  of   expenditures  for  debt  service.    Even 
net  profit  on       under  such  a  provision,  however,  the  tax-rate  on  land  values   in 
assessed  land      1910  could  have  been  $4.51,  which  would  have  yielded  the  con- 
values  would      siderable   sum  of  $180,488,541.97,  instead   of  the  actual   levy   of 
New  York          $7°>753>23I-24-     Six  per  cent  net  profit  on  the  assessed  land  value 
landowners          °^  New  York  in  1910  (a  low  assessment)   would  have  yielded  to 
An  1910  the  owners  $240,067,689.06.     There  are  probably  very  few  who 

$240,067,000,00.    would  claim  that  the  rights  of  the  nearly  5,000,000  people  who 
contribute  to  the  land  values  of  the  city  are  to  the  rights  of  the 
York  City  owners  of  ground  rents  only,  as  $70,753,231.34  are  to  $240,067,- 

689.06,  the  potential  value'to  the  ground  rent  owners.     They  agree 
more  than  one-  «•«•  1-    •  • 

fourth  of  the      tnat  a  different  division  of  the  profits  of  land  values  is  in  order. 

potential  rev-      While  in  few  other  cities  is  the  contrast  so  striking,  the  principle 
enue  from  land    holds  in  all  of  them. 

5.  Heavy  taxation  of  land  values  would  reduce  the  annual  muni- 
cipal expenditures  for  the  acquisition  of  land  for  municipal  pur- 

66 


poses.  There  is  not  an  American  city  which  to-day  owns  enough  Heavy  taxa- 

land   for  municipal  purposes,  but  every  progressive  city  is   con-  hon  °f  land 

stantly  acquiring  land  for  dock  and  harbor  improvements,  parks  Deduce  ™ost  of 

and  playgrounds,  sites  for  schools  and  other  municipal  buildings  \an^  for  pubnc 

and   other   public   purposes.     Such   expenditures    frequently   total  purposes. 
one-tenth  to  one-fifth  of  the  aggregate  corporate  stock  budgets  of 
most  American  cities,  that  is  sums  of  $1,000,000  to  $8,000,000. 

"Excess   condemnation"  has   been  suggested   as   a   method   of  "Excess  con- 
enabling  the  city  to  secure  land  without  any  cost,  that  is  the  con-  demnation"  of 

demnation  by  the  city  of  more'  land  than  is  needed  for  the  specific    an    ls  on  y  a 
...  •"     .         •  *    partial  method 

purpose   for  which  it  is  acquired,   and  the  resale  or   leasing  of  at  ^est  Oj 

such  surplus  land  as  a  means  of  recouping  the  city  for  its  outlay,   taxing  land 
Under   certain   conditions,   excess   condemnation  may  be   feasible,  values. 
but  it  is  inadequate   as  a  means  of  securing  sufficient  land  for 
the  city  in  several  respects.    Excess  condemnation  does  not  reduce 
but   rather   increases   the   price   of    land   since   the   courts    which 
determine  the  price  to  be  paid  always  favor  the  individual  owner 
of  property  rather  than  the  city,  while  the  city  has  to  pay  also 
for  the  land  to  be  resold  a  price  considerably  higher  than  a  private 
owner  would.     This   means   that  the  city   would  have   to   resell 
its  property  for  which  it  already  has  paid  a  super  price,  so  to 
speak — at  a  heavy  advance  in  order  to  repay  the  cost  of  the  same 
super  price  which  it  has  paid  for  the  property  it  reserves  for  its 
own  use.     In  developed  sections  of  the  city  land  is  already  very 
expensive  and  even  the  slight  increase  in  value  is  unwise  since  Some  limita- 
as  has  been  pointed  out  healthy  conditions  of  living  and  working  tions  of 
are   as   essential   as   revenues   from   land.     Excess   condemnation  "Excess 
in  such  sections  of  a  city  would    naturally    be    used    chiefly  for   c 
street  widening,  transit  purposes,  and  a  few  public  buildings.     It 
is   equally  important  that   land  in  outlying  residence   sections   of 
a  city  where  the  city  would  acquire  holdings  for  schools,  public 
buildings,  parks,  etc.,  should  be  kept  cheap.    More  expensive  land 
means  higher  rents  under  the  present  system  of  taxing  land  and 
buildings  at  the  same  rate.     In  any  part  of  the  city  therefore  the 
landowner  would  gain  materially  under  a  system  of  excess  con- 
demnation, while  the  ultimate  user  of  the  excess  land  purchased 
would  have  to  pay  higher  rents.     All  the  city  attempts  to  do  by 
excess  condemnation  is  to  prevent  the  owners  of  a  small  amount 
of  land  from  making  as  much  profit  on  the  land  as  they  would 
otherwise  do,  and  the  city  does  it  in  a  very  costly  way. 

By  taxing  land  values,  however,  so  heavily  as  to  retain  most 
of  the  economic  rent,  land  will  be  much  cheaper,  and  the  owner 

67 


Cities  run  into 
debt  because 
they  don't  tax 
land  values. 


The  change 
from  incurring 
debt  to  taxing 
land  values 
should  be 
gradual. 


of  land  will  have  an  economic  motive  to  sell  it  to  the  city  for  a 
very  low  price,  just  exactly  as  he  will  have  a  motive  to  use  his 
land  for  some  productive  purpose  so  as  to  secure  a  revenue  there- 
from. With  the  present  system,  moreover,  of  paying  for  so-called 
improvements  by  corporate  stock  issues  to  run  usually  forty  to 
fifty  years,  and  bearing  3^  per  cent  to  4j^  per  cent  interest  every 
acquisition  of  this  nature  puts  a  load  of  unnecessary  debt  upon  fu- 
ture generations  and  excess  condemnation  would  tend  to  increase 
this  debt,  the  only  alternative  being  that  the  user  of  land  shall  bear  it. 

6.  Heavy  taxation  of  land  will  facilitate  the  reduction  of  city 
debts. 

It  is  largely  owing  to  failure  to  tax  land  values  that  cities  have 
piled  up  their  enormous  debts  instead  of  meeting  the  current  and 
recurring  expenses  by  taxation.  In  1908  the  funded  debt  of  the 
one  hundred  and  fifty-eight  cities  in  the  United  States  having  in 
that  year  a  population  of  30,000  or  over,  was  $1,937,284,018, 
which  is  more  than  twice  the  interest  bearing  debt  of  the  country 
on  June  3Oth,  1910,  vie.,  $913,317,490. 

The  temporary  nature  of  most  of  the  improvements  and  ex- 
penditures for  which  this  debt  was  incurred  is  surprising. 

City  buildings,  exclusive  of  schools  and  other  departmental 

buildings    $50,788,879 

Police  and  Fire  Departments 24,444,256 

Sewers  and  sewage  disposal 133,262,790 

Street  pavements  23,792,014 

Bridges  and  abolition  of  grade  crossings 74,227,876 

Other  highway  purposes 187,788,081 

School  buildings  and  sites 220,751,095 

Libraries,  art  galleries  and  museums 22,220,615 

Parks  and  gardens 132,826,822 

Miscellaneous  purposes  96,779,353 

Funded  debt  and  special  assessment  loans I5M35>677 

Water  supply  systems 312,216,444 

Electric  light  power  and  gas  supply  systems 6,893,500 

All  other  241,474,805 

For  f undings  and  ref undings 252,917,661 

It  is  not,  of  course,  suggested  that  it  is  practicable  immediately 
to  pay  off  city  debts  nor  to  pay  for  all  city  improvements  as  they 
are  acquired.  Most  of  the  corporate  stock  issued  in  recent  years 
and  bearing  3j^  per  cent  to  4^2  per  cent,  has  been  for  a  period  of 
forty  to  fifty  years,  and  a  large  part  of  the  debt  has  been  incurred 
within  the  past  decade.  There  are  practically  no  improvements  which 
should  not  be  paid  for  within  thirty  years,  and  twenty  years  is  usually 
a  long  enough  term,  while  pavements  and  constantly  recurring  needs 

68 


and  improvements  such  as  schoolhouses,  parks   and  playgrounds   The  adoption 
should  be  paid  for  within  five  to  ten  years,  preferably  the  former  JfJJ*£o/ 
period.    Of  course,  no  one  would  suggest  either  that  current  obli-  meeting  current 
gations   and  debts  incurred  by  cities  should  be  paid  so  long  as   obligations  by 
cities  have  the  present  system  of  taxation  which  crushes  the  lives  '^^^ 
out  of  the  poorer  classes  of  their  citizens.     A  small  increased  tax-  ^  ^  J^' 
rate  on  land  values  would  have  obviated,  however,  any  such  debt  qmte  taxation 
burden  as  the  existing  one.     One  effect  of  the  unholy  alliance  be-   of  land  values. 
tween  the  land  and  the  loaning  interests  in  American  cities  which 
has  created  such  huge  debts  is  the  payment  in  1908  by  the  cities 
referred  to  of  $82,272,249  in  interest  on  debt,  that  is  about  one- 
fifth  of  the  total  general  city  expenses.    The  increase  in  net  debt 
during  the  year   was   $185,877,856,  nearly  one-half   of   the  total 
general   city   expenses. 

7.  Higher  taxation  of  land  values  would  encourage  the  logical  Higher  taxa- 
and  economic  development  of  cities.  *™  °f  land 

As  every  observer  of  American  cities,  especially  those  with  a  JJJJJJj^  eco_ 
large  area,  knows,  their  growth  has  been  determined  chiefly  by  the  nomic  dty 
landed  and  other  real  estate  interests.    These  interests  secure  the  planning  and 
laying  out  of  transit  lines  to  their  land  in  outlying  sections  of  the  city  development. 
and  immediately  urge  the  needs  of  the  district  for  schools,  sewers, 
etc.    Thousands,  and  in  many  cities  tens  of  thousands,  of  available 
lots  are  left  unimproved.    The  development  of  the  city  instead  of 
being    concentric,    that    is    from    the    center    out    in    all    direc- 
tions,   is    sporadic    and    irregular.    This  involves  a  much  greater 
expense     to     the     city     in     constructing     streets,     sewers     and 
in     providing    transit     lines     as     well     as     policing     these     new 
districts.      With     such     taxation     of     land     values     as     would 
secure  a  large  proportion  of  the  ground  rent  of  cities,  there  would   Wasted  garden 
not  be   any  occasion  for  such  competition  with  its   costly  waste  and  agricul- 
to  the  city,  because  the  net  return  to  the  owner  of  land  would   tural  areas  in 
be  more  nearly  equal.     There  are  in  most  American  cities— and 
this  will  be  increasingly  true,  as  adjacent  areas  are  incorporated 
under  schemes  for  city  planning — large  areas  which  for  many  years 
should  not  be  used  for  housing  or  commercial  purposes,  but  which 
would  yield  a  large  net  profit  if  used  for  intensive  agriculture.  The 
way  in  which  several  American  cities  have  attempted  to  meet  this  fllogical  tneth- 
situation  by  different  tax-rates  is  illogical.     Thus  in   1908,   Phil- 
adelphia  had  three  tax-rates  per  $1,000  of  assessed  value,  $15.00 
on  city  property,  $10.00  on  suburban  and  $7.50  on  farm  property.   ^y  Different 
Pittsburgh  had  also  three  similar  types  of  property  with  tax-rates   tax-rates. 

69 


Heavy  taxa- 
tion of  land 
values  will 
prevent  land 
booms  and 
premature 
building. 


Faulty 
valuation  of 
agricultural 
lands. 


Yields  from 

intensive 

gardening. 


Americans 
laggards  in 
intensive 
gardening. 


Land  specu- 
lators prevent 
logical  and 
profitable  use 
of  land. 


respectively  of  $9.50,  $6.33  and  $4.75  with  several  additional  rates 
for  separate  political  divisions.* 

There  were  in  all  in  1902  forty-two  cities  having  two  or  more 
different  tax-rates. 

If  land  were  assessed  equitably,  that  is  at  full  selling  price  in 
the  open  market,  and  taxed  at  a  uniform  and  high  rate  the  owners 
of  what  is  properly  still  agricultural  land  in  cities  would  realize 
that  the  stimulus  to  buildings  in  the  centers  of  the  city  and  dis- 
tricts near  the  centers  of  a  higher  rate  of  taxation  on  land,  would 
be  so  potent  that  it  wouldn't  pay  them  to  construct  high  tenements. 

A  relatively  small  investment  yields  a  large  return  in  intensive 
agriculture  when  mixed  with  brains. 

As  Mr.  H.  B.  Fullerton,  the  Director  of  Agricultural  Develop- 
ment of  the  Long  Island  Railroad  has  pertinently  put  it: 

"For  some  reason,  as  far  as  we  can  find  out,  absolutely  unknown  to 
any  one,  farm  land  is  considered  worth  about  $100.00  per  acre,  and 
this  price  is  a  very  common  figure,  whether  the  acre  be  60  miles  from 
the  post-office  or  neighbor,  or  whether  it  be  close  to  a  big  market  and 
within  a  mile  of  a  post-office,  railroad  station  and  schoolhouse,  whether 
it  be  a  muck  soil  of  unknown  depth  or  a  sandy  soil  8  inches  deep  or  a 
clay  soil  2  feet  deep  or  an  ideal  mixture  of  clay  and  sand,  as  upon  Long 
Island,  3  feet  in  depth. 

"Few  are  the  potato  growers  on  Long  Island  who  do  not  get  from 
150  to  200  bushels  annually  which  are  sold,  practically  always,  at  50 
cents  or  more  per  bushel,  and  the  price  as  a  rule  runs  from  65  cents  to 
90  cents,  and  a  yield  of  300  bushels  is  common  and  400  bushels  per  acre 
is  occasional.- 

"Market  gardening  in  this  country  is  just  starting  Americans,  as 
a  rule,  know  practically  nothing  of  intensive  gardening.  The  market 
gardeners  about  New  York  are  mainly  foreigners,  the  greater 
part  of  them  Germans,  with  some  French,  some  Belgians,  some  Hol- 
landers, some  Slavs,  and  even  Chinese  and  Japanese.  Some  of  these 
men  make  the  soil  return  as  great  a  dividend  as  do  the  most  expert 
gardeners  who  are  situated  in  the  environs  of  Paris  and  who  on  three 
acres  have  raised  $3,000  worth  of  crops  in  one  year.  This  yield  of 
$1,000  per  acre  has  been  surpassed  many  times  in  this  country  on  fruit, 
on  berries,  on  asparagus  and  on  many  other  single  crops. 

"Long  Island's  waste  land  is,  much  of  it,  held  now  by  speculators 
who,  paying  no  taxes  to  speak  of  and  undoubtedly  in  many  cases  none 
at  all,  can  afford  to  wait  for  the  natural  rise  in  land  value  that  must 
invariably  come  to  every  square  foot  lying  as  near  New  York  City,  and 
especially  rapid  will  be  the  increase  on  Long  Island  because  of  its 
climate,  tempered  by  the  great  bodies  that  surround  it,  and  the  soil,  con- 
trary to  tradition  and  science,  our  experimental  farms  has  proven  to 
be  3  feet  in  depth." 


Pittsburgh  has  this  year,  however,  abolished  this  classification. 


70 


Many  other  American  cities  can  duplicate  these  conditions.  It 
is  extremely  suggestive  that  a  State  Senator  .from  the  agricultural 
county  of  Queens  with  the  approval  of  many  citizens  of  his  county, 

and  of  the  other  agricultural  district  of   New  York  City,  Rich-  Bureau  of 

mond  County,  are  trying  to  secure  the  creation  of  a  Bureau  of  A9nculture 

Agriculture  and  Horticulture  in  the  city  of  New  York  to  stimu-  ^  practical 

late  and  direct  the  proper  and  profitable  use  of  acreage  holdings  in  ^ew  York 

and  vacant  lots  in  these  two  boroughs   for  intensive  gardening.  City. 
They   state  in  their  brief  for  such  a  bureau  that  the  proposed 

higher  taxation  of  land  values  will  necessitate  such  use  of  land  Normal  hous- 

and  mention  that  some  of  the  most  successful  and  profitable  gar-  ing  conditions 

dening  in  the  world  is  carried  on  in  these  two  boroughs  which  don>t  require 

are   a   political  part  of  the  most  congested  city  in  the  civilized  Me  immediate 

world,  while  they  equally  recognize  that  the  adoption  of  a  normal  c{t  ?$  vacant 

standard  of  housing  will  not  create  a  demand  for  all  vacant  land  \an^  for  hous- 

in  the  city  for  many  years  to  come.  ing  purposes. 


CHAPTER  VII. 

Some  Social  Reasons  for  Taxing  Land  Values 

Heavily 

That  the  permanent  improvement  of  Social  reasons 
living  conditions   awaits    more     fundamental    readjustments,   and  f°r  heavy 

changes  than  our  country  has   hitherto  essayed  is   the  dominant  ta*atlon  °f 
,         .  -          ,       -    ,  .  r~  land  values. 

note  of  social  work  of  this  century.     To  secure  to  every  producer 

the  fruit  and  enjoyment  of  what  he  produces,  to  make  possible 
initiative  and  independence,  is  the  goal  of  social  organization. 
That  many  steps  and  many  methods  will  be  needed  to  reach  this 
goal  is  self-evident.  Since  over  one-third  of  the  nation's  popula- 
tion is  living  in  cities,  over  one-fourth  in  the  one  hundred  and 
fifty-eight  cities  concerning  which  figures  have  been  presented  in 
this  discussion,  and  the  indications  are  unmistakable  that  the  trend 
to  large  and  small  cities  will  continue,  the  freeing  of  the  land  for 
use  deserves  most  careful  consideration. 

The  endowment  of  the  Russell  Sage  Foundation  for  the  Improve-  Investigations 


ment  of  Living  Conditions  was  heralded  as  the  harbinger  of  better  are  no 

times.     With  a  few  conspicuous  exceptions  that  body  has  failed  uejor 

.  .  .  .  •  *  f  1  obvious  needed 

either  to  recognize  or,  if  recognizing,  to  deal  with  the  fundamental 


causes  of  poverty.     One  of  their  latest  experiments  is  an  effort  to 

provide  model  homes  for  people  of  moderate  means  in  the  agricul- 

tural borough  of  Queens  some  seven  miles  from  Manhattan  at  For-- 

est  Hills.    The  operating  company  known  as  the  Sage  Foundation  Sage  Founda- 

Homes  Co.  has  skipped  over  tens  of  thousands  of  vacant  lots  near   tion  Homes 

Manhattan  held  for  speculative  increases  and  gone  out  to  upset  land  C°mPany- 

values  in  what  should  have  been  farming  country  for  some  years 

to  come.    They  found  the  land  speculator  on  the  agricultural  ground 

ahead  of  them,  and  they  paid  speculative  prices  and  profits.     The 

running  time  from  the  Pennsylvania  station,  the  prospectus  of  the 

company  announces  "is  from  13  to   15  minutes.     The  commuta- 

tion rate  is  $6.80  a  month,  5O-trip  tickets  cost  $9.25,  round  trip 

tickets  45  cents."     In  addition,  of  course,  10  cents  a  day  or  $2.60 

a  month  will  be  necessary  for  carfare  in  Manhattan  for  most  people, 

making  a  total  of  $9.40  a  month  or  $112.80  a  year;  as  much  for 

carfare  as  many  working  people  can  afford  to  pay  for  rent.   Rents 

in  that  charmingly  exclusive  place  will  run  from  about  $20.00  to 

73 


Experience 
should  have 
reduced  rents, 
if  possible. 


A  business 
concern,  not  a 
charity. 


Perpetuating 
poverty  -for  the 
joy  of  inves- 
tigating it. 


$50.00  per  month  or  $240.00  to  $600.00  a  year — that  is  carfare  and 
rent  will  total  at  least  $350.00  a  year  or  nearly  half  the  wages  of 
unskilled  workmen.  It  is  understood  that  the  company  has  given 
up  its  intention  of  supplying  the  need  for  good  housing  at  reason- 
able rents  for  wage-earners,  a  crying  need  not  being  met  by  any 
force  or  agency  in  the  city  at  present.  It  is  quite  natural  that  they 
have  done  so  since  a  worker  can't  afford  to  pay  over  one-fifth  or  a 
maximum  of  one-fourth  of  his  income  for  rent  including  as  should 
be  done,  carfare,  and  five  times  $350.00  is  $1,750  a  year,  while  four 
times  $350.00  is  $1,400.  Unskilled  workers  in  New  York  earn  only 
$550.00  to  $700.00  a  year  and  skilled  $800.00  to  $1,500.00;  while 
clerks  get  from  $1,200  to  $2,000  at  the  most. 

It  should  be  impossible  to  claim  any  inefficiency  or  waste  in  the 
laying  out  of  this  company's  tract  of  land  consisting  of  142  acres, 
because  it  was  done  by  a  landscape  architect  of  international  fame, 
Mr.  Frederic  Law  Olmsted.  As  they  state  too,  ''the  fortunate 
location  of  the  place  on  the  border  of  Forest  Park  has,  of  course, 
made  it  wholly  needless  to  provide  any  large  park  within  the  tract 
itself,"  but  they  have  nevertheless  provided  a  small  one.  Economy 
of  construction  has  also  been  assured  by  the  fact  that  Mr.  Grosve- 
nor  Atterbury  has  been  the  architect.  Everything  has  been  favorable 
to  the  provision  of  homes  at  reasonable  rentals  for  wage-earn- 
ers, that  is  $12.00  to  $14.00  a  month  at  the  maximum,  but  pri- 
vate charity  here  again  as  in  the  case  of  the  City  and  Suburban 
Homes  Co.  has  shown  that  it  cannot  compete  with  an  unjust  system. 
The  Sage  Foundation  Homes  Company  admits  that  its  proposition 
is  purely  a  business  one,  since  it  states  in  its  prospectus  under  the 
heading,  "Business  Undertaking": 

"The  undertaking  is  primarily  a  business  enterprise  in  which  certain 
trust  funds  have  been  invested  in  the  definite  expectation  of  securing  an 
adequate  business  profit,  to  be  applied  to  the  purposes  of  the  trust.  The 
fact  that  those  interested  in  this  development  hope,  at  the  same  time,  to 
demonstrate  that  it  is  possible  to  develop  a  more  attractive  plan  and 
better  type  of  houses  than  those  commonly  found  in  commercial  devel- 
opments makes  it,  if  anything,  more  important  to  insure  financial  success 
of  the  venture.  Owners  of  land  elsewhere  could  not  be  expected  to 
follow  the  example  of  this  company  unless  it  can  show  a  profit  satis- 
factory to  the  average  investor." 

It  has  been  pretty  clearly  demonstrated  that  "an  adequate  busi- 
ness profit"  in  real  estate  means  all  that  the  traffic  will  bear,  and 
that  to  improve  permanently  the  living  conditions  of  wage-earners, 
the  net  return  upon  land  must  be  greatly  reduced.  It  may  be  quite 
possible  for  this  company  or  any  others  "to  carry  out  its  aims  in 


74 


creating  a  homogeneous  and  congenial  community,"  but  no  general 
social  advance  can  be  secured  by  their  methods.     Lots  can  be  ob- 
tained for  from  $800.00  up  to  $2,000.00  in  Forest  Hills  and  not  only 
has  the  company  been  obliged  to  pay  speculative  prices  for  land, 
but  it  is  asking  those  who  buy  land  there  to  pay  an  advance  on  real 
values.     The  Sage  Foundation  Homes  Co.  is  not  entitled  to  a  6   Wage-earners 
per  cent  business,  or  even  a  4  per  cent  philanthropic  profit  upon  the  prefer  the 
land  values  which  the  people  of  New  York  create.     It  should  be    reduction  of 

said  in  fairness  to  some  of  the  developers  of  land  in  the  borough  grountd  ™nts  *° 

&t     investigation 
of  Queens,  near  Manhattan,  that  they   do  not  charge  any   such  by  the  Sage 

exorbitant  rents  yet,  though  they  are  organized  upon  the  same  prin-  Foundation. 
ciple  of  charging  every  bit  that  they  can. 

Russell  Sage  used  to  advise  people  to  buy  land  and  wait  for  the  Results  of 
increase  in  value.    Whatever  may  be  the  motives  of  the  Sage  Foun-  ^ussel1  Sage's 
dation  Homes  Company  they  have  learned  probably  by  this  time 
and  have  certainly  demonstrated  to  every  informed  person  who  has 
watched  their  operations  that  for  a  city  to  permit  people  to  follow 
Mr.  Sage's  advice  is  an  insuperable  obstacle  to  the  general  improve- 
ment of  living  conditions.    Partly  because  people  have  followed  the 
advice  quoted  this  company  has  provided  beautiful  homes  for  peo- 
ple with  incomes  of  $2,000  to  $5,000  a  year  or  more,  a  negligible 
percentage  of  New  York's  five  millions,  but  when  they  attempt,  if 
ever  they  do,  the  imperative  task  of  providing  good  homes  for  the 
city's  millions  they  will  appreciate  even  more  fully  the  immorality 
of  Mr  Sage's  advice  to  reap  where  one  has  not  sown.    It  is  to  be 
hoped  they  will  not — as  their  prospectus  indicates  they  now  plan  to   tio^can't 
do — attempt  to  make  money  to  study  causes  of  poverty  by  one  of  affor^  to  ^e 
the  fundamental  causes  of  poverty,  charging  as  much  for  the  use  of  unjust. 
land  values  as  for  buildings. 

The  social  unrest  among  social  workers  is  the  most  striking  fact  Social  unrest 
of  social  work  in  which  is  included  the  anti-tuberculosis  campaign,  amonff  social 
the  housing  campaign,  charitable  and  relief  organizations,  settle- 
ments, church  and  other  institutional  work,  etc.,  throughout  the 
country.  To  be  sure  some  leaders  who  have  salaries  of  $5,000  to 
$10,000  a  year  are  still  cheerful  as  to  social  conditions  and  able  to 
endure  the  continuance  of  suffering  on  the  part  of  the  poor  with 
a  most  commendable  degree  of  equanimity,  on  the  infrequent  occa- 
sions when  they  come  within  sensing  appreciation  of  the  existence 
of  poverty,  save  as  a  pathological  anomaly.  Some  members  of 
boards  of  directors  of  charitable  societies  who  are  profiting  by 
the  system  and  conditions  which  make  charity  necessary,  naturally 
view  with  some  perturbance  the  changing  of  these  conditions,  while 

75 


Is  the 

alternative 
Socialism  ? 


Public,  not 
personal  vices, 
chief  causes  of 
poverty. 


Taxation  of 
land  values  is 
not  the  only 
method  of 
preventing 
poverty. 


others  are  honest  with  themselves.  For  instance,  although  the  sec- 
retaries of  the  three  largest  relief-giving  societies  in  Manhattan,  the 
New  York  Charity  Organization  Society,  the  United  Hebrew  Chari- 
ties and  the  New  York  Association  for  Improving  the  Condition 
of  the  Poor  endorse  the  halving  of  the  tax-rate  on  buildings ;  the 
Boards  of  these  societies  officially  have  not  done  so,  although  they 
may  later. 

The  visiting  nurses  and  doctors,  however,  and  the  investigators 
for  relief  agencies,  the  settlement  and  church  workers  in  the  midst 
of  the  real  poverty  and  deprivation  of  tenement  life  in  American 
cities  appreciate  the  existence  of  poverty.  They  are  becoming  in- 
creasingly socialists  in  the  sense  of  believing  that  the  government 
should  own  and  operate  all  means  of  production,  as  the  only  method 
of  wiping  out  monopoly  and  ensuring  decent  conditions  of  living  for 
the  wage-earners  of  city  and  country  alike.  Most  of  these  humbler 
workers  and  in  their  courageous  moments  the  leaders  of  social  work 
admit  that  poverty,  that  is  the  inability  to  secure  employment  at 
wages  which  enable  a  family  to  maintain  a  reasonable  standard  of 
living,  a  minimum  standard  for  national  efficiency,  is  due  not  to 
personal  defects  of  character  in  any  appreciable  number  of  cases, 
but  to  social  conditions  over  which  the  poor  have  no  control.  Drunk- 
enness, thriftlessness,  laziness  and  vice  are  the  causes  of  poverty  in 
some  cases,  and  the  results  in  others,  it  is  generally  agreed ;  but  lack 
of  steady  employment,  sickness,  low  wages,  industrial  accidents, 
unsanitary  dwellings,  high  rents,  high  cost  of  food  and  clothing, 
and  immigration  are  the  symptoms  of  causes  usually  recognized  now 
to  be  the  really  important  causes  of  poverty  in  American  cities. 
With  remedying  or  removing  several  of  these  causes  the  heavy  taxa- 
tion of  land  values  in  cities  so  as  to  secure  most  of  the  ground  rent 
has  admittedly  little  connection.  Industrial  accidents  must  be  pre- 
vented and  industry  made  to  bear  the  burden  of  its  own  careless- 
ness and  risks,  instead  of  compelling  the  individual  workman  to 
do  so.  The  series  of  middlemen  each  of  whom  takes  a  profit  on 
farm  produce  and  manufactured  goods,  and  thus  increases  the  cost 
of  food  to  the  consumer  and  reduces  the  profits  to  the  producer, 
must  be  eliminated,  by  some  other  action  than  the  higher  taxation 
of  land  values,  although  such  taxation  will  encourage  the  utilization 
of  vacant  land  in  cities  for  intensive  gardening  and  tend  to  reduce 
the  cost  of  garden  truck  in  cities. 

The  higher  prices  extorted  through  protective  duties  on  articles 
consumed  by  the  working  classes  must  be  lowered  by  other  action, 
too,  than  adequate  taxation  of  land  values,  while  such  taxation  alone 

76 


will  not  solve  the  difficulties  of  assimilating  in  American  cities 
hordes  of  immigrants  ignorant  of  our  language,  and  untrained  to 
earn  even  the  minimum  wage  essential  to  a  living  standard. 

What  part  then  does  the  recovering  by  the  city  through  taxation  But  is  the  first 
of  most  of  the  ground  rent  have  to  do  with  the  problem  of  poverty?  S*?P  m  l 
Although  it  has  been  discussed  somewhat  in  the  chapter  on  "The 
Land   Question   and   Housing  Reform"    further   illustrations   will 
show  other  relations. 

THE  SECURING  OF  GROUND  RENTS  BY  TAXATION  WILL  : 

ist.  Reduce  rents  and  make  homes  cheaper. 
2nd.  Compel  landowners  not  tenement  tenants  to  pay  taxes. 
yd.  Take  a  heavy  burden  off  industry  and  permit  the  payment 
of  higher  wages. 

4th.  Encourage  the  appropriate  use  of  vacant  land. 

$th.  Safely  permit  the  provision  of  social  needs  by  the  city. 

The  student  of  social  conditions  realizes  that  something  besides 
mere  geographical  position  makes  the  minimum  living  wage  in  New 
York  City  $700.00  to  $800.00  for  a  family  of  father,  mother  and  three  "Living  wage" 
children  under  working  age,  while  this  minimum  is  from  $50.00  to  ctf?\  Delude  a 

° 


$150.00  less  in  other  cities  of  the  country.  He  appreciates  too  that  to  / 
secure  a  living  wage  whatever  amount  that  may  be  in  any  city,  does  owneYm 
not  mean  necessarily  that  the  sum  now  required,  should  be  required. 
If  wastes  can  be  eliminated  the  cost  of  living  can  be  reduced.  It  is 
just  as  effective  in  maintaining  the  standard  of  living  to  reduce  the 
rents  $50.00  as  to  increase  wages  by  this  amount.  Manufacturers 
should  pay  a  living  wage,  but  that  living  wage  cannot  be  made  to 
include  permanently  6  per  cent  net  return  upon  the  value  of  land 
used  by  their  workers  and  other  producers.  If  it  does  include 
such  net  return  the  price  of  goods  will  include  this  charge,  and  the 
consumers  among  whom  are  the  workers  on  the  manufactured  ar- 
ticles will  pay  higher  prices. 

Schedule  "K"  comprising  the  iniquitous  tariffs  on  woolen  goods  Schedule  "K" 
was  advocated  by  some  because  it  enabled  the  nearly  5,000,000  peo-  and 
pie  directly  and  indirectly  concerned  in  the  manufacture  of  woolen 
goods  to  receive  better  wages.     But  schedule  "K"  was  indefensible 
because  based  upon  privilege,  and  schedule  "K"  also  compelled  those 
engaged  in  the  manufacture  of  woolen  goods  as  well  as  others  to 
pay  higher  prices  for  these  goods.    The  same  conditions  obtain  with 
reference  to  ground  rents,  except  that  relatively  few  people  profit 
by  private  confiscation  of  'ground  rents,  while  every  one  has  to  pay 
more  because  of  such  confiscation.    The  right  to  private  confiscation 

77 


Landowners 
are  now  the 
largest 

ultimate  bene- 
ficiaries of  all 
economies, 
inventions,  etc. 


Social  aspects 
of  lower 
rents. 


Competition 
building 
stifled  by 
taxing 
buildings. 


of  ground  rent  is  claimed  to  be  permanent,  by  the  confiscators  there- 
of. Tariffs  may  be  reduced  or  abolished,  economies  may  be  effected 
in  construction  of  buildings,  inventions  may  reduce  the  cost  of 
living  in  a  thousand  ways,  efficiency  may  eliminate  waste  in  produc- 
tion, but  the  right  to  ground  rent  if  admitted,  is  to  all  intents  and 
purposes  eternal.  No  matter  what  economies  or  savings  may  be 
effected  in  cost  of  production  of  any  material  the  tendency  is  for 
the  landowner,  that  is  the  owner  of  ground  rents,  to  be  the  residual 
legatee  or  beneficiary  of  such  economy  or  saving  under  the  present 
system  of  permitting  the  owner  of  land  to  secure  the  ground  rent, 
or  a  large  proportion  thereof.  Private  right  to  ground  rent  is  now 
being  questioned  throughout  the  civilized  world  for  social  reasons 
because  the  securing  of  ground  rents  by  taxation  will : 

IST.  REDUCE  RENTS  AND  MAKE  HOMES  CHEAPER. 
(Assessments  in  all  these  illustrations  are  taken  at  full  value.) 
If  a  tenement  assessed  for  $25,000,  on  land  assessed  for  $15,000 
nets  6  per  cent  return  (above  taxes,  vacancies,  etc.),  the  total  net 
return  is  $2,400,  $1,500  on  the  tenement  and  $900  ground  rent.  If 
the  owner  of  the  site  of  the  tenement  received  only  2  per  cent  profit 
on  the  cost  of  the  land  his  total  ground  rent  would  be  only  $300.  That 
is,  the  ground  rent  would  be  reduced  an  average  for  each  of  twenty 
families,  who  might  rent  the  entire  tenement,  from  $45.00  to  $15.00. 
Evidently  this  saving  of  $30.00  a  year  would  be  worth  while  to  a 
family  whose  earnings  are  only  $600.00  to  $700.00  a  year.  Equally 
evidently  the  sum  required  for  a  living  wage  irrespective  of  these 
differing  amounts  in  different  cities  would  be  reduced  by  this  sum, 
from  the  amount  required  to  pay  the  owner  of  land  6  per  cent  net 
ground  rent.  A  further  result  of  taxing  land  values  heavily  would 
be  to  compel  the  owner  of  land  in  a  built-up  neighborhood  to  improve 
it  with  buildings  that  would  yield  some  return,  whether  they  be 
factories,  office  buildings  or  tenements.  The  general  knowledge 
the  owner  of  land  has  of  the  development  and  needs  of  the  neigh- 
borhood would  determine  what  improvement  he  should  make,  but 
naturally  in  a  district  already  supplied  with  many  factories  and  office 
buildings,  tenements  would  offer  a  better  investment.  This  com- 
petition of  tenements  for  tenants  would  also  tend  to  reduce  rents 
and  save  the  tenant  money.  A  net  return  of  4^  per  cent  on  a 
building  and  2  per  cent  on  the  site  of  a  building  would  be  better  than 
no  return  upon  the  joint  investment  and  the  economic  motive  would 
impel  the  owner  to  secure  some  return,  even  if  it  be  only  this 
lower  one.  The  saving  in  rent  represented  by  the  difference  between 


a  6  per  cent  net  return  upon  the  investment  in  the  building  and  a 
4^2  per  cent  net  return  amounts  to  $18.75,  to  a  family  renting  a 
tenement  apartment,  whose  average  value  is  $1,250.00.    This  with  a 
2  per  cent,  instead  of  6  per  cent  net  return, — on  a  site  whose  propor- 
tionate value  is  $750.00, — totals  $48.75,  and  this  saving  of  $48.75 
a  sufficiently  heavy  taxation  of  land  values  would  unquestionably  Charity  in 
effect.    It  must  be  sorry  consolation  to  appreciate  that  the  total  ex-  American 
penditure  for  charities,  public  and  private,  in  most  American  cities  c      .  se   om  , 
does  not  equal  the  ground  rent  confiscated  by  landlords  from  the  rent  exiorte^ 
beneficiaries  of  such  public  and  private  charity  and  others  living  from  its 
below  the  standard  of  efficiency.     From  the  social  point  of  view   "beneficiaries!' 
which  is  concerned  more  directly  than  either  fiscal  or  economic  con- 
siderations with  the  psychology  of  character,  it  is  worthy  of  note 
that  any  approximate  method  of  justice  is  better  than  the  most  per- 
fect administration  of  charity.     Five  years'  work  by  the  writer  in 
the  Philadelphia  Society  for  Organizing  Charity  and  the  Society 
to  Protect  Children  from  Cruelty,  and  visits  to  "case  committees" 
of  societies  in  New  York,  Chicago,  Boston,  Philadelphia,  and  Balti- 
more,  with  a  large  acquaintanceship  among  workingmen,  have  con- 
vinced him  that  there  is  no  more  effective  blow  to  the  self-respect 
of  any  workingman  than  recourse  to,  or  intervention  in  his  family 
by  any  charitable  agency.     No  matter  how  frank  the  admission  by 
the  relief  agency  that  they  do  not  blame  the  applicant  to  them, — or 
the  "needy  case"  referred  to  them  for  relief, — for  causes  over  which   Taxation  of 
he  has  no  control,  regardless  of  the  tact  with  which  the  remotest 
relatives  and  clumsiest  clues  of  the  victim  of  the  twin  evils  of 
poverty  and  charity  are  hunted  down,  the  knowledge  that  his  name 
is  down  on  the  books  of  any  charitable  society  for  time  and  eternity 
— or  until  such  time  as  high  rents  compel  the  society  to  save  room 
by  destroying  its  wealth  of  records  of  poverty, — is  a  blow  to  his 
independence  and  a  permanent  disgrace  to  the  honest  laboring  man 
who  would  be  independent.    Nor  can  even  the  fact  that  it  costs  from 
one-eighth  to  one-third  or  over  of  the  relief  dispersed  by  charitable 
agencies  to  convince  them  of  honest  poverty,  assuage  the  wound  to 
his  self-respect,  though  being  human  he  doesn't  envy  the  investigator  Accurate 
but  rather  congratulates  him  upon  having  a  "steady  job  at  some-  records  of 
thing  that  pays  him  a  living."    The  one  hundred  and  twenty  thousand  *°™£y  are  no 
immaculately  accurate  records  of  families  and  individuals  who  have    ,     causes  Oj 
applied  for  relief  to  different  charities  of  the  city  now  filed  in  the  poverty. 
Registration  Bureau  of  the  New  York  Charity  Organization  Society, 
would  be  less  by  several  scores  of  thousands  had  landowners  in 
this  city  been  unable  to  confiscate  ground  rents  as  they  have  in  the 

79 


Most  interim 
relief  for  the 
poor  is  really 
payment  of 
ground  rent 
to   landowners. 


Immigration 
not  chief 
cause  of 
poverty. 


Home  life  and 
taxation  of 
land  values. 


Easier  for 
wage-earners 
to  pay  higher 
tax  on  land  to 
city  than  to 
landowner. 


past,  and  for  every  reduction  in  the  number  of  these  records  there 
would  be  a  larger  number  of  families,  and  single  men  and  women, 
with  an  untarnished  record  of  economic  independence.  Relatively 
few  families  in  New  York  City  or  any  other  American  city  are  per- 
manently dependent,  that  is  pensioners,  and  only  a  small  per  cent 
apply  for  relief,  while  of  those  applying,  the  majority  seek  only  what 
the  charities  with  scientific  inaccuracy  call  "interim  relief,"  but  which 
scientific  accuracy  would  denominate  "payment  of  ground  rent  to 
the  landowner."  To  be  sure  such  "interim  relief"  seldom  equals 
the  confiscation  of  the  landowner,  for  $48.75  is  a  large  sum  for 
"interim  relief" — it  is  a  month's  to  six  weeks'  wages  for  an  unskilled 
wage-earner  depending  upon  where  he  lives,  but  the  confiscation  of 
a  month's  or  six  weeks'  wages  in  ground  rents  is  an  injustice  which 
no  civilized  community  should  tolerate. 

Not  even  immigration  can  be  assigned  as  the  chief  cause  of 
poverty  in  American  cities,  for  while  the  value  of  the  product  of  an 
untrained  immigrant  may  not  justify  the  payment  to  him  of  the  cost 
of  living  in  New  York  City,  it  is  nevertheless  true  that  with  a  world 
market  the  value  of  the  product  of  the  untrained  immigrant  in  most 
lines  of  manufacture  is  as  great  in  Omaha,  Springfield,  St.  Joseph, 
Waterloo,  Iowa,  and  New  Haven,  Conn.,  as  in  New  York  City, 
while  the  cost  of  living  is  much  less  in  all  of  these  cities  than  in 
New  York.  In  all  these  cities,  however,  as  in  New  York  the  con- 
fiscation of  ground  rent  by  the  landowner  whether  it  be  on  a  large 
or  small  value  is  a  cause  of  poverty. 

The  desirability  of  home  life  in  small  houses  is  generally  con- 
ceded by  social  workers.  As  has  been  shown  in  the  discussion  of 
the  relation  between  land  values  and  housing  reform,  the  heavy 
taxation  of  land  values  will  benefit  substantially  the  man  who  wants 
his  own  home.  A  social  point  of  view  does  not  condone  congestion 
per  acre  as  does  Mr.  Veiller,  the  Secretary  of  the  National  Housing 
Association,  who  maintains  that  it  makes  little  difference  how  many 
people  are  housed  per  acre  providing  the  dwellings  are  sanitary. 
The  most  extortionate  owner  of  ground  rent  could  hardly  advance 
a  more  anti-social  argument,  but  the  consensus  of  opinion  in  this 
country  as  abroad  is  so  emphatic  in  favor  of  the  detached  dwelling 
that  the  help  of  heavy  taxation  of  land  values  in  securing  the  de- 
sideratum will  be  generally  invoked.  The  effect  of  heavier  taxation 
of  land  values  in  cheapening  land  will  also  inure  to  the  benefit 
of  the  prospective  home  owner  since  he  can  buy  his  land  cheaply, 
for  the  prices  of  land  represent  only  the  capitalized  net  return,  and 
it  is  easier  for  the  workingman  to  pay  3  per  cent,  or  even  5  per  cent 


80 


on  the  land  values  he  owns  year  by  year  in  taxes  as  he  uses  the  land 
than  to  advance  this  use  value  capitalized  when  he  acquires  the  plot 
of  ground,  since  with  this  tax-rate  on  land,  buildings  could  be  largely 
or  entirely  exempted  from  taxation. 

2ND.  COMPEL  LANDOWNERS,  NOT  TENEMENT  TENANTS,  TO  PAY 
TAXES. 

The  injustice  of  robbing  by  taxation  widows,  consumptives,  and  Taxing  build- 
children  is  less  defensible  from  a  social  than  from  even  an  economic  *W  robs 

r  .  .  A  f  .  widows,  chil- 

or  fiscal  point  of  view.  dmt  ^ 

The  Committee  on  the  Prevention  of  Tuberculosis  of  the  New  consumptives. 
York  Charity  Organization  Society  in  urging  recently  the  appropria- 
tion of  a  small  proportion  of  the  sum  needed  to  provide  additional 
beds  for  consumptives  in  the  city  says  that  in  no  other  way  can  the  And  ^  ^  Q 
death  rate  from  consumption  be  reduced.     Admittedly  more  hospi-  cruei  an^ 
tal  beds  for  consumptives  and  better  means  of  segregating  them  are  costly  way  to 
necessary  to  reduce  the  death  rate  from  consumption,  but  is  that  prevent  con- 

all,  and  does  the  provision  of  beds  for  advanced  consumptives  by  su™Ptlon>  <*nd 
i  .  ,       «  .  ....      relieve  widows 

increasing  the  taxes  which  other  consumptives  must  pay  quite  justify  and  c^i^ren 

itself?  That  committee  in  common  with  similar  committees  in  cities 
throughout  the  country  have  sought  by  exhibits,  street  car  transfers, 
lectures  and  other  means  to  convince  the  public  that  sunshine,  fresh 
air,  rest,  good  food  and  relief  from  anxiety  are  essentials  to  prevent   The  irony  of 
consumption.     The   irony  of  their  remedy  has  appealed  to  many   tuberculosis 
besides  the  victims  of  America's  national  sin,  whom  they  are  trying   exhibits  while 
to  help,  for  the  obviousness  of  poor  people's  inability  to  secure  the  build™#s  are 
essentials  to  the  prevention  of  consumption  is  patent  to  any  fair- 
minded  person. 

In  the  striking  pamphlet  that  the  New  York  Committee  on  the 
Prevention  of  Tuberculosis  have  prepared  advocating  the  provision 
of  hospital  beds  they  present  several  photographs  of  tuberculous 
patients. 

One  is  a  flashlight  of  a  victim  in  bed,  with  drawn  features,  his 
projected  eyes  peering  into  the  unknown  future.    Under  this  they 
ask,  "Shall  men  like  this  be  discharged   from  hospitals  to  die  in 
tenements  ?"  with  the  indictment  "Frederick  R.  discharged  from  hos- 
pital August  25th,  died  August  3Oth."    Another  picture  of  a  man 
and  his  wife  and  three  small  children  centers  indignation  over  the 
explanation,  "This  helpless  consumptive  allowed  to  leave  the  hospital  J**  Clty  robs 
to  make  room  for  others,  thus  insuring  the  infection  of  his  chil-  Motives  to 
dren."  A  third  picture  is  of  "Five  delicate  children  in  daily  contact  bury  dead 
with  a  dangerous  consumptive  father,  an  advanced  case,  unable  to  consumptives. 

81 


Taxing  build- 
ings penalizes 
preventive 
philanthropy 
and  business 
alike. 


Larger 
municipal 
social 
programs. 

Shall  progress 
be  made  by 
increasing 
deficits  of  the 
poor  or  reduc- 
ing unearned 
surpluses  of 
the  rich? 


Strikes  show 
small  savings 
of  skilled 
workers. 


work,  shares  bed  with  one  of  his  children."    Further  questions  the 
Committee  have  forgotten  or  neglected  to  ask : 

"Shall  the  40,000  known  consumptives  in  New  York  City  with 
their  families  be  taxed  to  provide  the  nearly  4,000  additional  beds 
needed  for  consumptives,  in  addition  to  supporting  the  present  3,200 
beds  and  the  victims  cared  for  therein,  or  shall  we  tax  land  values 
and  let  landowners  share  their  community  created  wealth,  and  so 
save  the  lives  of  consumptives  ?  Since  sunshine  is  essential,  this  com- 
mittee claims,  to  the  prevention  and  cure  of  consumption  they  might 
appropriately  ask:  "Shall  we  continue  a  system  of  taxation  which 
puts  a  premium  upon  dark  rooms  or  shall  we  encourage  the  con- 
struction of  healthy,  well  lighted  tenements  by  reducing  taxes  upon 
them  through  taxing  land  values?" 

With  the  hearty  endorsement  of  many  large  charitable  societies, 
American  cities  are  now  facing  their  responsibility  to  provide  ade- 
quate relief  in  their  homes  to  their  dependent  citizens — pending  the 
organization  of  social  insurance  and  the  assumption  by  industry  of 
its  full  burdens. 

The  acceptance  by  cities  of  their  proper  responsibility,  will  in- 
volve for  some  years  at  least,  a  large  increase  of  municipal  expendi- 
tures. 

Shall  this  additional  burden  be  extorted  from  the  families  now 
on  the  verge  of  starvation,  from  those  hovering  on  the  verge  of 
dependence  or  existing  far  below  the  standard  of  national  efficiency, 
are  questions  of  compelling  social  import.  That  these  classes  will 
pay  much  of  the  cost  of  a  larger  and  proper  municipal  program 
under  the  present  system  of  taxing  land  and  improvements  at  the 
same  rate  is  conceded,  but  social  justice  cannot  concede  that  long 
usage  transforms  injustice  into  justice  but  rather  demands  that  the 
wealth  of  land  values  the  poor  help  to  create  shall  be  adequately 
taxed  since  such  taxation  is  the  only  method  by  which  the  owners 
can  now  be  made  to  share  equitably  with  the  producers. 

3RD.  TAKE  A  HEAVY  BURDEN  OFF  INDUSTRY  AND  PERMIT  THE 
PAYMENT  OF  HIGHER  WAGES. 

Should  relief  agencies  give  relief  to  families  while  the  wage- 
earner  is  on  strike  has  been  debated  in  most  large  cities  in  which 
one  or  more  strikes  have  during  the  past  ten  years  cost  the  finan- 
cial independence  of  families,  self-respecting  hitherto,  and  revealed 
the  narrow  margin  between  economic  dependence  and  independence 
among  many  skilled  wage-earners. 

It  is  true  that  labor  union  members  are  usually  the  last  to  appeal 
to  organized  charity  for  relief,  because  they  have  their  own  relief 

82 


funds,  and  the  more  serious  problem  of  relief  is  that  of  the  perma-  Permanently 
nently  underpaid,  largely  because  unorganized,    laborers    who    are  underpaid 

chronically  below  the  standard  of  efficient  citizenship.    The  ground  wo^kers 

..  e  ...  exist  on  a 

rent  taken  from  their  employers,  if  manufacturers,  will  vary  from  ^efic^ 

2  per  cent  to  8  per  cent  of  their  pay-rolls,  and  while  it  is  not  sug- 
gested that  manufacturers  would  necessarily  pay  higher  wages  they 
obviously  would  be  better  able  to  do  so  if  released  from  double  taxa- 
tion by  the  landowner  as  well  as  by  the  city.  That  an  increase  of 
2  per  cent  to  8  per  cent  in  wages  would  be  an  important  raise  for 
both  skilled  and  unskilled,  organized  and  unorganized  workers  must 
be  admitted. 

4TH.  ENCOURAGE  THE  USE  OF  VACANT  LAND. 

The  disinclination  for  the  country,  for  gardening  and  for  agricul-   Vacant  land 
ture,  which  migrants  from  country  districts  to  cities  manifest,  is  not  *n  Clties 


shared  by  many  peasant  laboring  immigrants.    They  appreciate  the  afford 

J  \  J  t    and  needed 

opportunity  to  raise  vegetables,  as  successful  market  gardens  worked  empioyment  if 

and  in  some  cases  managed  by  immigrants  testify.    Vacant  lots  as-  highly  taxed. 
sociations  in  several  cities  have  performed  an  important  service  in 
bringing  people  and  land  together.     Such  efforts  would  be  greatly 
helped  by  the  heavier  taxation  of  land  values,  since  with  even  the 
present  low  taxation  land  can  be  secured,  but  a  heavier  tax-rate  will 
compel  it  to  seek  users.     The  incentive  to  economic  and  effective 
use  will  be  in  very  direct  ratio  to  the  increase  in  the  tax-rate  and 
the  provision  of  employment  thereby  created  would  be  of  utmost 
benefit  to  those  classes  of  the  community  who  need  outdoor  employ- 
ment, with  the  added  advantage  of  training  for  farm  life.     In  his   This  employ- 
evidence  before  the  Committee  on  Health  of  the  New  York  City   ment  would  be 
Commission  on  Congestion  of  Population,  Dr.  Wm.  H.  Park,  Di-  f^j^  t 
rector  of  the  Research  Laboratory  of  the  city's  Department  of  Health   f^f  ^red  of 
stated,  "It  is  even  dangerous  for  a  tuberculous  person  who  has   consumption. 
recovered  after  leaving  the  city  to  return  to  it  and  go  back  into  office 
work  or  any  of  the  ordinary  city  occupations.    The  fact  that  a  person 
has  had  consumption  proves  that  he  was  susceptible,  and  he  will 
usually  remain  susceptible." 

Since  this  holds  true  for  all  cities  as  for  New  York,  and  yet  Death  by 
death  by  starvation  is  as  deadly  as  death  by  consumption,  in  every  starvation  as 

city  of  the  union,  the  social  benefit  of  forcing  vacant  land  in  out-    ,ea  ,y^s 
,    .  .  '  death  by  con- 

lying  sections  of  a  city  into  use  for  those  citizens  handicapped  by 

bad  housing  conditions  and  predisposition  to  consumption  is  great. 
The  natural  encouragement  to  live  under  healthier  conditions  in 
new  sections  of  a  city  closer  to  such  work  is  a  marked  additional 
advantage. 

83 


Conclusion.; 
Total  ground 
rent  of  a  city 
is  maximum 
amount  that 
can  be  extorted 
from  most 
productive 
use  of  land. 

Present  ground 
rent  should 
be  divided 
between  the 
city,  user  of 
land  and  owner 
of  land. 

Landowner's 
share  of 
ground  rent 
should  be  re- 
duced to  the 
minimum, 
which  would 
encourage 
private  owner- 
ship of  land 
for  use. 


Poverty  cannot 
be  exterm- 
inated while 
landowners 
secure  the 
ground  rents 
they  now  do. 


5TH.  SAFELY  PERMIT  THE  PROVISION  OF  SOCIAL  NEEDS  BY  THE 
CITY. 

In  conclusion  the  social  viewpoint  justifies  the  correlation  of 
the  advantages  of  securing  most  of  ground  rents  as  follows : 

The  total  ground  rent  of  a  city  is  the  maximum  sum  that  can  be 
secured  by  the  owners  thereof  for  the  most  intensive  and  profitable 
use  to  which  each  section  is  best  adapted.  This  ground  rent,  actually 
derived  or  potential,  varies  from  6  per  cent  to  8  per  cent,  or  more. 
Naturally  this  cannot  be  taken  entirely  by  the  city  through  taxation, 
while  at  the  same  time  the  tenant  user  of  land  secures  the  gain  of 
reduced  rents  through  avoidance  of  the  payment  of  all  taxes.  No 
increase  in  the  city  budget  paid  by  taxes  on  land  values  alone,  how- 
ever, will  be  shifted  upon  the  tenant.  Hospitals  for  consumptives, 
municipal  social  service  departments,  exemption  from  taxation  of 
public  utilities  whose  net  profits  are  kept  by  governmental  regula- 
tion at  a  low  figure  with  resultant  reduction  of  charges  to  the  public 
for  products  or  service  rendered,  are  feasible  when  land  values  are 
adequately  taxed.  Ground  rents  should  by  taxation  of  land  values 
be  so  reduced  that  only  so  much  will  be  left  to  the  owners  of  land 
as  to  encourage  the  use  of  land  for  productive  purposes.  This  may 
be  i  per  cent,  il/2  per  cent,  or  2  per  cent,  but  it  is  the  token  and 
substance  of  private  ownership  in  land  for  use  and  not  for  specula- 
tion or  unearned  gain.  Every  increase  in  the  rate  of  taxation  on 
land  values  tends  to  reduce  the  amount  to  be  charged  as  rent  for 
any  building  since  the  owner  of  land  must  use  his  brains  to  secure 
gain  therefrom,  instead  of  using  without  payment  the  labor  of  others. 

In  most  cities  land  entirely  vacant  is  equal  in  value  to  from  one- 
twentieth  to  one-tenth  of  the  total  assessed  value  of  land.  In  1910 
for  instance,  wholly  unimproved  land  in  New  York  City  was  worth 
considerably  more  than  one-eighth  of  the  total  assessed  land  value 
of  the  city  and  the  increased  revenue  from  a  high  tax-rate  on  this 
vacant  land  will  materially  reduce  the  tax-rate  on  buildings.  The 
social  reasons  justify  and  even  compel  the  full  taxation  of  land  val- 
ues, as  the  next  step  in  the  extermination  of  poverty,  and  poverty 
cannot  be  abolished  while  landowners  secure  the  ground  rent  they 
now  do. 


CHAPTER  VIII. 

Sources  of  Municipal  Revenue  in  Some  Foreign 

Cities 

The  sources  of  Municipal  Revenue  in  many  foreign  cities  should 
be  considered  in  their  relation  to  the  welfare  of  the  community  since 
they  may  be  suggested  by  landowners  in  their  desire  to  postpone 
heavier  taxation  of  their  land  values,  as  substitutes  for  the  taxation 
of  land  values. 

Budapest  has  a  3  per  cent  tax  on  the  rent  paid  by  tenants,— an  Budapest. 
additional  tax  on  the  income  derived  from  real  estate, — and  a  4  per 
cent  tax  for  the  removal  of  garbage,  and  an  octroi  tax  levied  on 
food  products  as  well  as  one  levied  on  the  weight  of  vehicles  enter- 
ing the  city.  All  of  these  taxes,  of  course,  are  largely  shifted  on 
to  the  tenant.  The  writer  was  informed  by  the  city  statistician, 
three  years  ago  when  in  Budapest  that  rents  were  unendurably  high 
in  the  city  and  many  rooms  had  four  to  six  occupants  while  specu- 
lation in  land  was  most  profitable.  Other  revenues  in  Budapest  are 
from  industrial  licenses,  dog  licenses,  water  supply,  etc. 

Vienna  illustrates  well  the  fallacy  of  trying  to  conduct  municipal  Vienna. 
trading  for  profit, — although  the  city  derives  considerable  revenue 
therefrom, — while  failing  to  secure  revenue  from  normal  sources. 

The  principal  taxes  are  taxes  on  real  property  and  taxes  on 
personal  property  and  trade. 

Taxes  on  houses  are  assessed  on  the  amount  of  the  annual  rents, 
and  on  land  on  the  estimated  cadastral  revenue. 

A  trade  tax  amounting  to  10  per  cent  on  the  net  profits  is  levied 
on  joint  stock  companies. 

An  income  tax  is  assessed  on  the  entire  receipts  of  the  taxpayer 
from  whatever  source  derived,  although  incomes  of  less  than 
$244.00  per  annum  are  exempt. 

The  octroi  tax  yields  a  large  revenue.  Most  of  Vienna's  taxes, 
however,  can  be  shifted  to  the  ultimate  consumer. 

In  Germany,  the  main  municipal  taxes  are  the  income  tax,  the 
real  estate  tax,  industrial  tax,  tax  paid  by  restaurants,  drinking  sa- 
loons and  hotels  where  liquor  is  sold,  department  store  tax,  dog 
tax,  brewing  malt  tax,  temporary  vendor's  tax  and  exchange  of 
property  tax. 

85 


Berlin.  In  explanation  of  the  large  number  of  taxes  upon  industry  in 

Berlin  and  the  relative  exemption  of  land  values  from  taxation,  it 
should  be  stated  that  the  undemocratic  system  of  votes  according 
to  value  of  property  owned  still  obtains. 
Prof.  Frank  J.  Goodnow  states : 

"In  Berlin,  the  Prussian  city  in  which  the  voters  constitute  the 
largest  proportion  of  the  population,  in  1900  only  1,227  qualified  voters 
were  in  the  first  class,  20,821  were  in  the  second  class,  while  310,471 
constituted  the  third  class.  Or,  to  put  it  in  another  way,  22,048  voters 
could  elect  two-thirds  of  the  members  of  the  council,  while  310,471 
voters  could  elect  the  other  third.  Finally,  in  actual  practice,  the  two 
upper  classes  participate  more  generally  than  the  third  class  in  the 
election.  Thus  34%  of  the  third  class,  50.2%  of  the  first  class,  .and 
39.4%  of  the  second  class  of  voters  actually  voted  in  1898.  This  may 
be  due  in  some  degree  to  the  fact  that  the  vote  Is  an  open  and  not  a 
secret  vote." 

On  incomes  from  $214.20  to  $249.90  an  income  tax  of  $1.43  is 
levied  and  so  on  until  on  those  from  $428.40  to  $499.80,  $7.38  is 
levied.  It  will  be  noted  that  the  rate  upon  small  incomes  is  much 
higher  proportionately  than  upon  higher  ones.  For  1906-7  the 
yield  of  the  municipal  income  tax  was  $8,227,148. 

The  United  States  Consul-General  at  Berlin,  A.  M.  Thackara 
explains  the  real  estate  and  industrial  tax  in  Berlin  as  follows : 

"The  real  estate  tax  is  based  upon  the  value  of  real  estate  as 
appraised  by  a  permanent  committee  appointed  for  the  purpose  in  each 
of  the  kreise,  or  counties.  The  appraised  value  of  real  estate  is  deter- 
mined by  deducting  8  per  cent  of  the  gross  income  from  the  property,  for 
expenses,  such  as  taxes,  sewerage,  interest,  etc.,  and  multiplying  the  net 
income  by  16  to  22,  according  to  whether  the  location  of  the  property 
is  good  or  bad.  When  there  is  no  income  from  the  property,  the  value 
is  estimated  by  the  committee  and  taxed  accordingly.  The  tax  in  1908 
was  75  cents  per  $238  of  the  appraised  value  of  the  property,  and  in 
1909  the  rate  was  about  72.4  cents.  The  rate  is  fixed  by  the  tax  com- 
mittee. The  amount  collected  in  1906-7  was  $5,523,869. 

"There  are  four  classes  of  industrial  taxes,  depending  upon  the 
capital  invested  or  upon  the  amount  of  net  annual  profit,  as  follows: 
Fourth  class,  from  $357  to  $952  net  profit  or  $714  to  $7,140  invested 
capital;  third  class,  from  $952  to  $4,760  net  profit  or  $7,140  to  $35,700 
invested  capital;  second  class,  from  $4,760  to  $11,900  net  profit  or  $35,7oo 
to  $238,000  invested  capital;  and  first  class,  over  $11,900  annual  profit  or 
over  $238,000  invested  capital." 

The  revenue  to  the  city  from  the  industrial  tax  in  1906-7  was 
$2,449,119.  The  revenue  from  taxing  saloons  and  department 
stores  is  small. 

86 


A  unique  tax  is  that  on  the  change  of  ownership  of  real  estate  by 
sale  or  otherwise,  amounting  to  i  per  cent  of  the  value  of  improved 
and  2  per  cent  of  the  value  of  unimproved  property,  which  yielded 
in  1906-7,  $1,612,974. 

The  revenue  from  the  city's  gas  works  in  1906-7  amounted  to 
$1,967,788,  from  the  waterworks  to  $785,240;  from  stockyards  and 
abattoirs  to  $189,968,  while  the  8  per  cent  on  gross  earnings  of  street 
car  lines  for  the  use  of  the  streets  amounted  to  $819,416  in  1906-7. 

The  Berliner  Electrisitats  Werke,  a  private  company  which  fur- 
nishes electric  light  and  power  to  the  people,  pays  the  municipality 
for  the  use  of  the  streets  10  per  cent  of  its  gross  net  earnings 
amounting  in  1906-7  to  $899,957. 

For  the  fiscal  year  1906-7  Berlin  had  a  surplus  of  $3,486,595, 
a  little  more  than  the  total  receipts  from  the  city  gas  and  water 
works  and  the  revenue  from  the  8  per  cent  tax  on  the  gross  earn- 
ings of  street  car  lines  for  the  use  of  streets.  It  is  self-evident  that 
these  three  necessities  of  life  are  used  by  practically  all  of  the  work- 
ing people  of  Berlin  and  that  they  paid  higher  prices  to  yield  these 
net  profits.  Berlin  is  the  paradise  of  land  speculators  in  Germany  as 
New  York  is  in  this  country,  while  the  zone  system  of  fares  on 
lines  of  transit  gives  them  an  exceptional  opportunity  to  confiscate 
land  values. 

The  income  tax  both  for  state  and  municipal  purposes  is  based 
upon  income  from  personal  property,  that  is  business  as  well  as 
upon  real  estate,  land  and  buildings.  Even  in  the  case  of  the 
real  estate  tax  when  there  is  no  income  from  property,  the  estima- 
ted value  by  a  committee  representing  a  legislative  body  dominated 
by  realty  owners  is  usually  quite  low.  The  2  per  cent  on  transfer 
of  unimproved  property  is  of  course  in  the  nature  of  a  land  incre- 
ment tax  although  a  very  low  one,  but  is  paid  by  the  purchaser. 

The  basis  of  the  present  fiscal  system  of  Paris  was  enacted  im-  Paris. 
mediately  following  the  revolution  of  1789.    The  taxes  are  of  two 
classes,  direct  and  indirect. 

The  impot  fonder,  a  direct  tax  on  land  and  buildings,  averages 
about  3.20  per  cent  and  it  is  paid  by  the  owner  of  the  property, 
but  is  subject  to  a  complicated  system  of  temporary  exemptions  for 
certain  improvements. 

The  impot  personnel  mobilier  or  tax  on  unoccupied  houses  is  di- 
vided into  two  parts,  the  personal  tax  due  from  the  occupant  of  the 
premises  and  assessed  upon  all  residents  of  France,  and  the  "con- 
tribution mobiliere"  or  furniture  tax,  assessed  upon  the  rentable 
value  of  the  personal  domicile. 

87 


Consumer  the 


Paris  has  also  a  tax  on  doors  and  windows,  and  a  license  to 
transact  business  assessed  upon  the  practitioners  of  all  professions, 
trades  and  avocations  except  the  liberal  arts.  As  part  of  this  tax  a 
percentage  is  assessed  upon  the  rentable  value  of  the  domicile,  store, 
warehouse,  shop,  factory,  etc.,  occupied  by  the  person  taxed  as  a 
place  of  business. 

The  direct  taxes  are  those  based  upon  the  sale,  transfer  and 
introduction  of  articles  of  commerce  which  as  Mr.  Frank  H.  Mason, 
United  States  Consul-General  at  Paris  states,  "although  primarily 
paid  by  the  manufacturer,  the  importer,  or  the  dealer  are  ultimately 


ultimate  payer,    paid  by  the  consumer."      As  Mr.  Mason  states  further : 

"The  octroi  is  considered  an  annoying  and  troublesome  form  of 
taxation,  and  is  unpopular  with  the  public  and  costly  to  administer,  as 
it  entails  delays  at  the  city  gates  and  employs  an  army  of  inspectors  and 
collectors,  but  it  yields  in  an  average  year  about  109,000,000  francs,  or 
$21,037,000,  a  sum  which,  it  appears,  this  expensive  municipality  cannot 
spare  or  derive  from  any  other  source  without  reorganizing  the  present 
system  of  municipal  taxation." 


London. 


Tenant  pays 
the  rents. 


The  following  comment  on  the  system  of  taxation  in  London 
is  made  by  Consul-General  John  L.  Griffiths: 

"The  annual  rates  levied  in  the  different  parishes  in  London  vary 
from  $1.50  to  $2.57  in  every  $4.87  of  the  assessed  rental  value  of  the 
property.  There  have  been  fluctuations  in  the  rates  from  year  to  year 
in  the  different  parishes,  but  they  are  not  as  great  as  might  be  antici- 
pated. This  is  owing  to  a  disposition  to  increase  the  valuation  of  the 
rentals  of  all  property  to  meet  growing  expenditures  necessitated  by  the 
development  of  new  needs  and  functions  rather  than  to  augment  the 
rates.  The  rates  are  levied  on  real  property,  or  rather  upon  a  proportion 
of  its  rental  value. 

"The  tenant  usually  pays  the  rates,  or  the  greater  portion  of  them, 
so  that  if  the  rental  of  an  office,  or  a  dwelling  or  a  business  house  is 
$1,200  a  year,  he  must  pay  in  rates  ordinarily  about  one- third  or  $400 
more. 

"An  equalization  fund  was  established  for  London  in  1894.  This 
fund  is  raised  by  a  rate  of  about  2.^/2  cents  on  the  dollar  of  the  ratable 
value  levied  annually  on  the  whole  county  of  London.  The  fund  so 
raised  is  redistributed  on  the  basis  of  population.  A  poor  district 
with  a  congested  population  and  a  low  ratable  value  may  receive  several 
times  as  much  out  of  this  fund  as  would  go  to  a  more  advantageously 
located  district,  from  a  sanitary  point  of  view,  in  another  part  of  the 
city  with  a  similar  population  and  a  heavier  ratable  value. 

"The  greater  portion  of  the  revenue  required  for  the  carrying  for- 
ward of  the  government  of  London  is  raised  out  of  rates,  but  there  are 
also  further  sources  of  revenue  in  the  way  of  market  tolls,  rentals  of 
corporation  property,  building  fees,  contributions  by  the  fire  insurance 
companies  to  the  corps  of  the  first  brigade,  penalties,  costs  recovered, 

88 


etc.,    and    a    certain    amount    which    is    received  from    the    imperial 
exchequer.    About  65  per  cent  of  the  revenue  is  derived  from  the  rates, 

gl/2  per  cent  from  imperial  taxation,  and  the  balance  from  other  sources. 
"The  total  receipts  of  greater  London,  exclusive  of  loans,  of  all  the 
local    authorities    for    1906-07,    amounted    to    $126,449,949,    divided    as 
follows : 

Public  rate  $74,918,652 

Imperial  funds 14,195,250 

Tramways   6,921,088 

Markets    1,336,988 

Electric-lighting  undertakings  2,703,132 

From  other  local  authorities 15,531,022 

Other  sources  10,843,808 

"The  expenditures,  exclusive  of  loans,  during  the  fiscal  year  1906-7 
amounted  to  $119,022,146,  distributed  as  follows: 

EXPENDITURES.  AMOUNT. 

Administration  of  justice $801,172 

Education — 

Elementary $16,894,303 

Higher   3,328,900 

Electric  lighting  (other  than  public) 1,275,315 

Fever  and  small-pox  hospitals 2,064,403 

Fire  engines  and  brigades 1,146,996 

Highways,  bridges,  etc 8,663,757 

House  refuse,  removal  of 1,821,044 

Housing  of  the  working  classes 504,340 

Lighting   (public)    1,895,351 

Lunatics  and  lunatic  asylums 3,193,879 

Markets    643,327 

Parks,  etc 961,052 

Police  and  police  stations 9,11 7,554 

Poor  relief 13,077,639 

Sewerage  and  sewage  disposal  works 2,018,673 

Tramways   5,168,661 

Loan  charges 19,149,230 

Other  works  and  purposes 1 1,968,281 


Total    $103,693,877 

Payments  to  other  local  authorities,  etc 15,328,269 


Grand  total  $i  19,022,146" 

It  will  be  noted  that  the  expenditures  for  poor  relief  total  nearly 
one-ninth  of  the  city's  total  expenditures,  and  this  expense  with  the 
cost  of  lunatics  and  lunatic  asylums  and  loan  charges  (what  we 
designate  "debt  service")  was  $35,420,748  or  nearly  one-third  of 
the  total  municipal  expenditure  and  one-half  of  the  total  receipts 
from  the  public  rate,  of  which  as  Mr.  Griffiths  remarks:  "The 

89 


The  land  incre- 
ment tax  in 
Germany. 


Methods  and 
rates  of  land 
increment  tax 
in  German 
cities. 


tenant  usually  pays  the  rates  or  the  greater  portion  of  them."  To 
the  $8,258,076  receipts  from  tramways  and  markets  a  large  propor- 
tion of  the  wage-earning  population  of  London  contribute,  and  the 
direct  result  of  lowering  the  standard  of  living  by  running  these 
public  necessities  for  a  profit,  is  obvious.  It  is  not  strange  that  Mr. 
Lloyd-George  advocated  a  land  tax  as  a  means  of  securing  some 
revenue  since  the  landlord  "does  not  contribute  a  penny  out  of  his 
income  toward  the  local  expenditure  of  the  community  which  has 
thus  made  him  wealthy." 

TAXATION  OF  LAND  VALUES. 

The  most  important  and  general  method  of  taxing  land  values 
abroad  is  the  land  increment  tax. 

The  following  summary  of  the  extent  and  progress  of  taxing 
land  increment  in  Germany  is  taken  from  the  Report  to  the  Special 
Tax  Commission  of  Illinois  by  Prof.  John  H.  Fairlie: 

"The  taxation  of  the  increment  of  land  values  was  first  attempted 
in  a  practical  way  in  Germany.  A  tentative  step  was  taken  in  1898  in 
the  German  Colony  of  Kiautschou  in  China;  but  this  attracted  little 
attention.  More  general  interest  was  aroused  when,  in  1904  and  1905, 
the  two  important  cities  of  Frankfort  and  Cologne  enacted  ordinances 
for  the  taxation  of  the  increase  in  land  values.  These  have  been  fol- 
lowed by  a  considerable  number  of  municipalities,  including  both  large 
and  smaller  cities.  Dortmund  and  Essen  adopted  the  new  tax  in  1906; 
Breslau  and  Kiel  in  1907;  and  Hamburg  in  1908.  ...  In  Berlin 
itself,  the  Board  of  Magistrates  in  1907  proposed  the  introduction  of 
the  tax;  but  the  project  was  defeated  through  the  influence  of  the  House 
and  Land  Owners  Association  in  the  Municipal  Council. 

"In  July,  1909,  the  increment  tax  was  in  force  in  fifteen  of  the 
forty-one  German  cities  of  more  than  100,000  population,  and  in  at  least 
forty  smaller  places.  In  all  the  more  important  states  of  the  Empire, 
the  higher  administrative  officials  have  given  attention  to  improving  the 
details  of  the  tax. 

"The  several  local  tax  ordinances  vary  not  a  little  in  details;  but 
certain  main  features  appear  in  all  of  them.  The  object  upon  which  the 
tax  is  levied  is  the  unearned  increase  of  value  of  real  estate.  From 
the  total  increase  in  value,  as  measured  by  the  differences  between  the 
price  at  a  transfer  and  the  price  or  value  at  a  previous  change  of 
ownership,  reductions  are  allowed  for  the  expense  of  permanent  im- 
provements, street  building  and  sewer  connections,  transfer  charges,  and 
sometimes  for  other  expenses.  There  are  certain  exemptions,  both  for 
some  kinds  of  transfer  (as  inheritances  or  judiciary  sales)  and  for  small 
increases  in  value.  The  tendency  is  to  tax  increases  in  value  of  vacant 
land  more  highly  than  those  of  land  which  is  built  upon.  Special  pro- 
visions are  often  made  for  a  lower  tax  or  for  exemption,  where  the 
preceding  transfer  occurred  a  good  many  years  ago.  The  incre- 


The  accompanying  table  shows  the  proceeds  of  the  increment 
tax  in  a  few  German  cities  from  1906  to  1908. 


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Appeal   to 
conservatism 
of  land 
increment  tax. 


The  land 
increment 
tax  in  Great 
Britain. 


ment  tax  is  always  levied  on  the  principle  of  progression— at  a  higher 
rate  for  the  higher  proportionate  increase  in  value.  Minimum  rates  are 
from  3  to  10  per  cent;  maximum  rates  are  from  15  to  30  per  cent. 

"The  rapid  adoption  of  the  increment  tax  in  the  German  cities  indi- 
cates that  this  form  of  taxation  has  appealed  to  the  conservative  offi- 
cials and  members  of  councils  in  that  country,  in  spite  of  the  opposition 
of  real  estate  owners,  a  class  which  exercises  a  strong  influence  in 
municipal  government.  The  tax  has,  however,  been  in  force  for  too 
brief  a  period  to  demonstrate  very  clearly  what  the  effective  results  will 
be.  From  the  table  below,  showing  the  proceeds  of  the  tax  in  half  a 
dozen  of  the  larger  cities,  it  will  be  seen  that  the  revenue  shows  wide 
fluctuations;  and  it  forms  as  yet  but  a  small  fraction  of  the  income  of 
any  city.  The  largest  amounts  are  for  Frankfort-on-the-Main  (1,104,997 
marks  in  1906)  and  Hamburg  (1,500,000  marks  for  1908). 

"The  Imperial  Government  of  Germany  has  incorporated  the  incre- 
ment tax  in  the  new  finance  legislation  of  1909.  One  of  the  financial 
measures  passed  on  July  isth  of  that  year  provides  that  the  Empire 
shall  receive  twenty  million  marks  from  such  a  tax  by  1912.  Cities  in 
which  the  increment  tax  was  in  operation  before  April  i,  1909,  will  be 
compensated  for  five  years  after  the  Imperial  Act  goes  into  effect  by  an 
amount  equal  to  the  average  annual  yield  of  the  municipal  tax  prior  to 
April  i,  1909.  But  these  compensating  payments  will  be  made  only  from 
surplus  to  be  realized  over  and  above  the  twenty  millions  to  be  collected 
for  the  Imperial  Treasury." 

Prof.  Fairlie  summarizes  the  new  land  taxes  in  Great  Britain 
from  the  Parliamentary  Debates,  1910,  as  follows : 

"The  British  Budget  for  1909-10  (which  finally  became  law  April 
29,  1910)  provides  for  new  taxes  on  the  increment  of  land  values,  on 
the  site  value  of  undeveloped  land  and  on  mineral  rights. 

"A  valuation  of  all  real  property  in  the  United  Kingdom  is  to  be 
made,  as  from  the  3Oth  of  April,  1909;  and  on  any  increment  value 
accruing  after  that  date  a  tax  or  duty  of  one-fifth  (20  per  cent)  of  that 
value  will  be  taken  on  the  occasion  of  a  transfer,  or  a  lease  of  more 
than  fourteen  years  in  the  case  of  land  owned  by  incorporated  or  unin- 
corporated associations.  The  increment  value  is  the  increase  in  value  by 
any  other  cause  than  the  landowner's  own  labor  or  capital ;  but  the  first 
10  per  cent  of  this  'unearned  increment'  is  not  to  be  taxed,  nor  will  the 
increment  duty  be  charged  'in  respect  of  agricultural  land  while  that 
land  has  no  higher  value  than  its  value  for  agricultural  purposes.'  This 
tax  is  expected  to  fall  mainly  on  urban  building  land  and  mining  lands. 

"Another  tax,  called  a  reversion  duty,  of  10  per  cent,  will  be  charged  on 

the  benefit  accruing  to  a  lessor  on  the  determination  of  a  lease  of  over 
twenty-one  years. 

"A  third  provision  imposes  an  annual  duty  of  one-half  penny  in  the 
pound  (about  two  mills  on  the  dollar)  on  the  capital  site  value  of  unde- 
veloped land  exceeding  in  appraisement  $50.00  an  acre. 


"The  mineral  rights  duty  is  imposed  at  the  rate  of  5  per  cent  on  the 
rental  value  of  all  rights  to  work  minerals  and  of  all  mineral  way 
leaves." 

In  the  speech  on  the  proposed  land  tax,  Mr.  Lloyd-George  stated, 
"The  yield  in  the  first  year  will  necessarily  be  small  and  I  do  not 
think  it  safe  to  estimate  for  more  than  £50,000  for  1909-10.  -The 
amount  will  increase  steadily  in  future  years  and  ultimately  become 
a  further  source  of  revenue." 

In  his  Budget  Speech,  however,  he  discriminates  between  agri- 
cultural and  urban  land  and  between  the  extortions  of  urban  land- 
owners and  owners  of  agricultural  land. 

"Agricultural  land  has  not,  during  the  past  twenty  or  thirty  years,  Distinction 
appreciated  in  value  in  this  country.    In  some  parts  it  has  probably  gone   between  agri- 
down.     I  know  parts  of  the  country  where  the  value  has  gone  up.     But   cultural  and 
there  has  been  an  enormous  increase  in  the  value  of  urban  land  and  of   urban  land. 
mineral  property.     And  a  still  more  important  and  relevant  considera- 
tion in  examining  the  respective  merits  of  these  two  or  three  classes  of 
claimants  to  taxation  is  this.     The  growth  of  the  value,  more  especially 
of  urban  sites,  is  due  to  no  expenditure  of  capital  or  thought  on  the 
part  of  the  ground  owner,  but  entirely  owing  to  the  energy  and  the 
enterprise  of  the  community.     Where  it  is  not  due  to  that  cause,  and 
where  it  is  due  to  any  expenditure  by  the  urban  owner  himself,   full 
credit  ought  to  be  given  to  him  in  taxation,  and  full  credit  will  be  given 
to  him  in  taxation.      I  am   dealing  with  cases  which  are   due  to  the 
growth  of  the  community,  and  not  to  anything  done  by  the  urban  pro- 
prietor.   It  is  undoubtedly  one  of  the  worst  evils  of  our  present  system 
of    land    tenure    that    instead    of    reaping    the   benefit   of    the  common 
endeavor  of  its  citizens,  a  community  has  always  to  pay  a  heavy  penalty 
to  its  ground  landlords  for  putting  up  the  value  of  their  land. 

"There  are  other  differences  between  these  classes  of  property  which 
are  worth  mentioning  in  this  connection,  because  they  have  a  real  bear- 
ing upon  the  problem.  There  is  a  remarkable  contrast  between  the 
attitude  adopted  by  a  landowner  toward  his  urban  and  mineral  property, 
and  that  which  he  generally  assumes  towards  the  tenants  of  his  agri- 
cultural property.  I  will  mention  one  or  two  of  them.  Any  man  who 
is  acquainted  with  the  balance-sheets  of  a  great  country  estate  must 
know  that  the  gross  receipts  do  not  represent  anything  like  the  real  net 
income  enjoyed  by  the  landowner.  On  the  contrary,  a  considerable 
proportion  of  those  receipts  are  put  back  into  the  land  in  the  shape  of 
fructifying  improvements  and  in  maintaining  and  keeping  in  good  repair 
structures  erected  by  him  which  are  essential  to  the  proper  conduct  of 
the  agricultural  business  upon  which  rents  depend.  Urban  landlords 
recognize  no  obligation  of  that  kind,  nor  do  mineral  royalty  owners. 
They  spend  nothing  in  building,  in  improving,  in  repairing,  or  in  upkeep 
of  structures  essential  to  the  proper  conduct  of  the  business  of  the  occu- 
piers. The  urban  landowner,  as  a  rule,  recognizes  no  such  obligation. 
I  again  exclude  the  urban  landowner  who  really  does  spend  money  on 

93 


The  land  tax 
in  the 
Australian 
Common- 
wealth. 


Higher  tax- 
rate  on  land 
than  buildings 
in  Adelaide. 


his  property;  that  ought  to  be  put  to  his  credit.  The  rent  in  the  case 
with  which  I  am  dealing  is  a  net  rent  free  from  liabilities  or  legal 
obligations.  Still  worse,  the  urban  landowner  is  freed  in  practice  from 
the  ordinary  social  obligations  which  are  acknowledged  by  every  agri- 
cultural landowner  towards  those  whose  labor  makes  their  wealth." 

Dr.  Albert  Bushnell  Hart  in  the  "American  Year  Book,"  1910, 
summarizes  the  proposed  land  tax  in  the  Australian  Commonwealth. 

"The  progressive  land  tax  is  the  most  important  feature  of  the 
Labor  Party  program.  The  tax  is  to  be  levied  on  'the  reasonable  mar- 
ket value  of  the  land,  assuming  that  the  actual  improvements  thereon 
had  not  been  made.'  The  rates  run  from  id.  in  the  pound  on  estates 
between  £5,000  and  £10,000  in  value,  to  4d.  on  estates  above  £50,000. 
Absentee  landowners  (including  corporations  in  which  more  than  two- 
fifths  of  the  shares  are  held  by  absentees),  pay  taxes  on  the  whole 
value  of  the  property  and  id.  extra  on  every  pound  of  valuation;  others 
pay  taxes  on  market  values  less  £5,000.  The  usual  exemptions  are 
made  in  favor  of  land  held  for  charitable,  religious,  or  public  purposes. 
The  taxpayer  must  make  his  own  valuation,  which  may  be  amended  by 
a  commissioner,  who  has  power  also  to  make  independent  valuations  or 
to  use  those  made  by  any  state  authority.  The  taxpayer  may  appeal  to 
the  High  Court  against  overvaluation;  the  commissioner  may  also 
appeal  to  the  High  Court  for  a  declaration  allowing  the  Commonwealth 
to  resume  at  the  owner's  valuation  land  willfully  undervalued.  The  tax 
is  a  first  encumbrance  and  may  not  be  evaded.  Mortgagors  pay  it;  the 
mortgagee  is  not  liable  unless  he  has  entered  into  possession.  Willful 
understatements  involve  a  fine  of  £500,  plus  treble  tax;  and  estimates 
more  than  twenty-five  per  cent  below  the  finally  ascertained  value  are 
deemed  willful.  The  avowed  purpose  of  the  land  tax,  in  addition  to 
revenue  raising,  is  to  stimulate  immigration,  and  enforce  the  subdivision 
of  large  estates  which  have  never  been  placed  under  cultivation." 

Several  of  the  provinces  of  Australasia  have  increased  the  rate 
of  taxation  on  land  with  the  following  results.  Mr.  Arthur  Searcy, 
Deputy  Commissioner  of  Taxes  in  Adelaide,  reports  in  1906  the 
results  of  increasing  the  tax  on  land  from  y2  d.  to  y$  d.  in  the  £ : 

"Considerable  areas  of  suburban  land,  formerly  the  property  of 
large  owners,  have  been  subdivided,  and  many  persons  have  purchased 
a  plot  of  land  for  residential  purposes  and  built  thereon.  For  years 
past  there  has  been  a  gradual  closing  up  of  all  vacant  land  around  the 
city,  a  great  deal  of  which  may  be  attributed  to  the  land  tax,  more 
particularly  since  the  application  of  additional  and  absentee  land  taxes 
in  conjunction  with  the  increased  rates  of  income  tax  imposed  at  the 
same  time;  but  much  of  the  movement  would  have  occurred  irrespective 
of  taxation,  with  gradual  growth  and  advancement  of  the  state. 

"The  effect  on  the  building  trade  has  been  beneficial  owing  to  the 
subdivision  of  suburban  lands  and  the  building  of  residences,  as 
previously  mentioned. 


94 


"In  regard  to  land  speculation,  the  tax  must  certainly  have  a  deter- 
rent effect,  but  as  a  burnt  child  dreads  the  fire,  so  are  the  people  of 
South  Australia  chary  of  land  speculation  after  the  losses  generally 
sustained  with  the  collapse  of  the  'Land  Boom'  of  the  early  eighties." 

Mr.  L.  S.  Spiller,  the  First  Commissioner  of  Taxation  in  Syd- 
ney, says  that  by  the  tax  on  land : 

"Values  of  residential  properties  have  been  reduced  principally  in 
the  city  and  immediate  suburbs  by  reason  of  the  development  of  the 
more  outlying  area.  Vacant  sites  have  suffered  a  reduction  in  value  in 
many  districts.  The  tax  has  considerably  affected  land  held  solely  for 
speculation  and  has  certainly  compelled  many  owners  to  sell  for  a  lower 
figure  than  previously  required.  In  the  city  and  suburbs  very  little  land 
speculation  has  been  in  operation.  Buyers  now  in  view  of  the  Land 
Tax  mostly  secure  properties  with  the  definite  idea  of  speedily  making 
a  home,  and  not  as  heretofore,  waiting  for  a  rise  in  values. 

"In  the  country  the  effect  has  been  to  break  up  a  number  of  land 
monopolies  and  secure  improved  conditions  of  larger  and  closer  settle- 
ment with  considerable  profit  to  the  speculator  and  advantage  to  the 
purchaser." 

The  Marquis  of  Salisbury  stated  before  the  Royal  Commission 
on  the  Housing  of  the  Working  Classes,  in  1884: 

"A  proposal  to  remedy  overcrowding  for  which  the  state  is  largely 
responsible  by  utilizing  a  gain  on  enhanced  value  of  land  which  is  due 
to  density  of  population  can  hardly  be  called  eleemosynary.  It  more 
closely  resembles  the  provision  of  compensation  than  the  offer  of  a  gift." 

The  Select  Committee  on  the  Land  Values  Taxation,  etc.  (Scot-  Scottish  Select 
land)  Bill  (1906)  favored  a  higher  taxation  of  land  than  improve-  Committee 
ments,  and  state:  favor  higher 

tax-rate  on 

"The  desirability  of  taking  land  on  the  basis  of  valuation  does  not  land. 
depend  solely  upon  the  question  of  the  allocation  of  the  burden  between 
parties.    The  most  valuable  economic  advantages  of  this  reform  follow 
from  the  change  of  the  basis  of  rating.     We  have  already  referred  to 
the  nature  of  these  advantages,  which  may  be  thus  summarized: 

"First. — Houses  and  other  improvements  would  be  relieved  from  the 
burden  of  rating.  This  would  encourage  building,  and  facilitate 
industrial  developments. 

"Second. — As  regards  the  large  towns,  it  would  enable  land  in  the 
outskirts  to  become  ripe  for  building  sooner  than  at  present,  and  would 
thus  tend  very  materially  to  assist  the  solution  of  the  Housing  problem. 
It  would  also  have  a  similar  effect  in  regard  to  Housing  in  rural  districts. 

"In  our  opinion  these  advantages  depend  upon  the  alteration  of  the 
basis  of  rating,  and  are  not  dependent  upon  the  question  as  to  what 
proportion  ought  to  be  contributed  by  the  various  persons  interested  in 
the  property.  Without  seeking  to  minimize  the  importance  of  that  ques- 

95 


Municipal 
ownership 
of  land. 


Cities  without 
taxes. 


tion,  we  think  it  right  to  point  out  that  the  taxation  of  land  values  is 
advocated  equally  by  persons  who  take  different  views  upon  this  aspect 
of  the  question." 

An  indirect  method  of  taxing  land  values  or  securing  for  public 
use  the  ground  rent  of  land  in  vogue  in  foreign  countries,  especially 
in  Germany,  is  extensive  municipal  ownership  of  land.  This  is 
technically  "municipalization"  of  land  and  not  taxation  of  land 
values.  It  is  the  avowed  intention  of  many  German  and  Swiss 
municipalities  to  own  practically  all  the  land  within  the  city,  and 
large  tracts  outside  the  city  in  territory  to  be  annexed  as  the  city's 
population  increases.  In  addition  to  reducing  the  tax-rate  or  even 
in  some  cases  enabling  cities  to  conduct  government  without  any 
tax-rate  by  the  revenue  from  the  municipally  owned  land,  such  a 
policy  enables  the  city,  it  is  claimed,  by  competing  with  private  land- 
owners to  prevent  land  speculation,  and  to  keep  land  cheap  and 
rents  low. 

The  following  table  gives  the  acreage  and  per  cent  of  the  city's 
area  owned  by  several  German  cities  and  by  Vienna  and  Zurich 
in  1908: 

Total  Area    Total  Amount  of        Proportion  of  Total 

of  Land  Owned  by  City  Area. 

City.  City.  Within  City    Without 

Acres.  Acres.  Boundary.    Boundary 

Berlin 15,689.54  39,151.28 

Munich    21,290.24  13,597-02 

Leipzig   14,095.25  8,406.84 

Strassburg    19,345.45  11,866.98 

Hanover 9,677.25  5,674.90 

Schoneberg  2,338.60  1,633-33 

Spandau    10,470.37  4,480.79 

Zurich    10,894.64  5,621.52 

Vienna 67,477.57  32,062.48 

It  is  part  of  the  policy  never  to  part  with  any  land  the  city 
acquires  so  that  it  may  secure  not  only  the  ground  rental  of  the 
land  at  the  time  of  acquisition  but  as  well  the  increased  ground 
rental  due  to  the  small,  but  natural  increase  of  the  land  values 
with  increasing  population.  Professor  Adolph  Damaschke  gives 
two  cases  of  cities,  one  with  very  low  taxes,  the  other  with  prac- 
tically none: 

"From  Hagenau  (Alsace),  a  town  of  about  12,000  inhabitants,  I 
received  the  following  particulars:  'In  1891-92,  Hagenau  obtained 
£14,256  from  its  public  land.  To  this  add  the  produce  of  the  water 
system,  £1,075,  and  the  gas,  £850.  Local  rates  and  taxes  practically 
negligible  on  account  of  these  possessions. 

96 


9.2 

240.8 

23.7 

37-8 

32.3 

274 

33-2 

28.1 

37-7 

20.4 

4.2 

65.1 

3.05 

42.9 

26.0 

25-9 

13.4 

54-8 

"Gorlitz  (Schlesia)  takes  the  most  favorable  place  of  all  German 
towns  of  over  50,000  inhabitants  with  regard  to  local  rates  and  taxes. 
The  total  local  rates  per  inhabitant  came  in  1890-91  to  8  marks  35 
pfennigs;  in  1891-92  to  8  marks  2  pfennigs;  in  1892-93  to  7  marks  28 
pfennigs. 

"The  reason  lies  in  the  circumstance  that  this  town  has  obtained  a 
landed  property  of  77,127  acres,  from  which,  in  1892,  £33,028  went  to 
the  common  chest." 


97 


CHAPTER    IX. 

Possible  Methods  of   Taxing  Land  Values  in 
American  Cities 

The  admonition  to  "hasten  slowly"  is  a  short  way  of  saying  that 
evolution  is  better  than  revolution  in  securing  social  justice  which 
is  always,  in  the  long  run,  economic  justice. 

The  separate  assessment  of  land  and  improvement  values  is,  Separate 
of  course,  the  first  step  to  secure  a  fair  assessment  even  of  land  Assessment  of 
values.     A  bulletin  of  the  Census  Bureau  states  that  in  the  fol-  ^Mt-^w  s  th 
lowing  states  of  the  Union  in  1902  separate  assessment  of  land  first  step  in 
and  improvements  is  provided  for:  Arizona,  Arkansas,  California,  adequately 
Idaho,  Indian  Territory,  Indiana;  in  certain  cities  only  in  Kentucky;  taxing  land 
in  Maryland,  Massachusetts,  Montana,  Minnesosta,  Nebraska,  Ne- 
vada, may  be  assessed  in  New  Jersey;  in  New  Mexico,  since  1903 
in  New  York;  in  North  Carolina,  North  Dakota,  Ohio,  Pennsyl- 
vania, South  Dakota,  Utah,  Virginia,  Washington,  West  Virginia 
and  Wyoming;  that  is  in  twenty-six  states  and  territories.    Illinois 
has  since  made  such  provision.     In  very  few  cities  of  these  states, 
however,  is  such  separate  assessment  made. 

Several  methods  and  degrees  of  taxing  land  values  are  possible :   Taxing  land 

ist.    Lower  assessment  of  buildings  than  of  land,  and  deduc-  question  Of 
tion  in  assessment  for  depreciation  of  buildings  through  age.  method  and 

2nd.     A  lower  rate  of  taxation  on  all  buildings  and  personalty  degree, 
than  on  land. 

$rd.     Exempting  all  buildings  entirely  from  taxation. 

4th.  Exempting  from  taxation  certain  buildings  which  con- 
form to  a  high  standard  of  excellence,  either  for  a  term  of  years' 
or  permanently. 

$th.  Assessing  all  public  improvements  upon  property  bene- 
fited. 

6th.     Excess  condemnation  of  land. 
Jth.     Taxation  of  increment  of  land  value. 
Sth.     Municipal  ownership  of  land. 

99 


The  Vancouver 
method  of 

Proposed 
Referendum  in 
Missouri  on 
exempting 
ui   ings  from 
taxation. 


The  Chicago 
Tribune  on 
"Some  Var'vi- 
tions  on 

theory"*** 

Proposed 
referendum  in 
Seattle,  on 
exemption  of 
buildings  from 
taxation    ' 


Exemption  of 


reduces  a  city's 

borrowing 

capacity. 


IST.  LOWER  ASSESSMENT  OF  BUILDINGS  THAN  OF  LAND  AND 
DEDUCTIONS  IN  ASSESSMENT  FOR  DEPRECIATION  OF  BUILDINGS 
THROUGH  AGE. 

This  is  the  method  employed  in  Vancouver  where  in  1896,  50% 
of  tne  vaiue  of  improvements  was  exempted  from  taxation;  ten 
years  later  in  1906,  the  exemption  was  increased  to  75  per  cent,  and 
in  1910  the  exemption  was  made  complete.  A  referendum  has 
been  prepared  to  be  submitted  to  the  voters  of  Missouri,  provid- 
ing  that  after  1913,  no  personal  property  of  any  kind  which  does 
not  belong  to  public  service  corporations  be  subject  to  taxation. 
After  1913,  all  owners  of  improvements  are  to  be  entitled  to  an 

exemptjon  of  $3  ooo  on  the  value  of  their  improvement  and  by  1922 

VOf 
a  sliding  scale  will  cut  off  all  taxes  on  improvements.     It  is  pro- 

vided further  that  no  lands  except  those  of  public  service  corpora- 
tions shall  ever  go  untaxed.  The  property  of  public  service  cor- 
porations, real  and  personal,  is  to  be  assessed  at  its  true  value  and 
the  price  it  would  bring  at  a  voluntary  sale  and  a  levy  on  one-half 
that  value  is  to  be  made,  but  whenever  these  corporations  accept 
regulation  of  their  charges,  and  the  values  of  the  franchises  be  so 
reduced  that  the  companies  shall  make  only  a  reasonable  return 
on  the  actual  value  of  their  physical  holdings,  further  exemptions 
mav  be  made.  The  Chicago  Tribune  reporting  on  this  proposal 
says  editorially  :  "It  will  be  seen  that  the  amendment  contains  some 
variations  on  the  George  theory,  variations  made  necessary  by  mod- 
ern  conditions  of  business,  and  the  relations  of  corporations  to  the 
state."  The  poll  tax  is  to  be  abolished  and  no  licenses  to  be  col- 
lected from  any  business  not  requiring  police  regulation,  as  a  fur- 
tner  method  of  taxing  land  values  in  Missouri.  A  referendum  vote 
is  to  be  taken  in  Seattle  next  March  on  exempting  25  per  cent  of  the 
value  "of  all  buildings,  structures  and  improvements  or  other  fix- 

tures  of  whatever  kind  upon  land"  from  taxation  in  1912  and  1913, 

t    .  .  ^ 

5°  per  cent  m  J914  an(*  I9I5'  7$  Per  cent  m  I9l&>  anc*  IO°  Per 
cent  thereafter. 

The  exemption  of  $3,000  of  the  assessed  value  of  all  improve- 
ments from  taxation  is  a  favorite  proposal  to  secure  a  higher  taxa- 
tion on  land  values,  and  bills  to  this  effect  have  been  introduced 
in  many  state  legislatures.  * 

Exemption,   moreover,   reduces   the  taxable   base  of   the   city, 

Sm°e  ^  may  be  fairly  claimed  that  although  a  lower  rate  of  taxa- 
t*on  on  buildings  than  on  land  would  not  reduce  the  assessed  valua- 
tion  of  the  buildings,  exemption  from  taxation  would  do  so,  and 
thereby  reduce  the  borrowing  capacity  of  the  city  which  is  limited 


100 


usually  to  a  certain  per  cent  of  the  assessed  valuation  of  real  estate. 
While  the  desire  to  run  into  debt  to  avoid  taxation  of  land  values 
obsesses  owners  of  land  in  American  cities  as  at  present,  it  will 
be  difficult  to  secure  any  general  endorsement  from  business  men 
of  a  proposal  to  limit  such  extravagant  high  finance,  although  they 
appreciate  the  justice  and  advantages  of  taxing  land  values  higher. 

2ND.    A  LOWER  RATE  OF  TAXATION  ON  ALL  BUILDINGS  AND 

PERSONALTY  THAN  ON  LAND. 

P   Land  values  in 
It  will  have  been  evident  by  this  time  that  the  present  rate  of  American 

taxation  of  land  in  most  American  cities  can  hardly  be  called  taxa-  c^es  are 

tion  of  land  values  since  practically  none  of  the  economic  rent  of  undertaxed, 

land  is  secured  by  taxation.     Probably  the  most  feasible  way  for  not  taxed. 

American  cities  to  encourage  the  construction  of  buildings  and  to  Rate  Of  taxa. 

secure  a  larger  proportion  of  the  cost  of  city  government  by  taxing  tion  on  land 

land  values  is  to  tax  land  at  a  higher  rate  than  buildings,  although  values  will  be 

this  is  not  incompatible  with  reducing  the  assessment  on  buildings  determ<ined    y 

_  ,    ,  ,.  sentiment 

due  to  depreciation  through  age.    Just  how  much  lower  a  rate  of  against  taxing 

taxation  on  buildings  than  on  land  should  be  sought  depends  chiefly  industry,  and  a 

upon  the  degree  to  which  the  community  realizes  the  justice  of  community's 

such  encouragement  to  industry  and  check  on  the  confiscation  of  ability  to  secure 

ground  rents  by  the  owners  of  land.    In  most  American  cities  there  soctal  £*£** 

is  at  present  a  strong  sentiment  on  the  part  of  tenants,  including  *esentatives 

business  men  and  manufacturers,  in  favor  of  this  procedure  which 

,  .       .  ,   ,.  Advocates  of 

only  needs  organization  and  direction.  "taxation  with- 

Naturally  any  increase,  however  slight,  in  the  rate  of  taxation  out  represen- 
on  land  will  be  opposed  by  owners  of  vacant  property,  and  by  those  tation"  oppose 
who  still  claim  the  right  to  acquire  the  fruit  of  other  people's  labor  taxation  of 
and  industry  without  paying  them  for  it.     It  is  well  known  that  land  values- 
at  present  the  land  and  loaning  interests  control  the  government  of  Halving  the 

most  American  cities  and  are  at  least  almost  equally  powerful  in  ^x-rate  on 

..  ,  buildings  and 

most  state  legislatures.      It  is  manifestly  better  to  make  any  change  personaity  in 

in  the  rate  of  taxation  gradual,  and  perhaps  as  moderate  a  change  five  years  a 

as  could  reasonably  be  suggested  is  that  of  the  New  York  City  Com-  reasonable 

mission  on  Congestion  of  Population,  that  the  rate  of  taxation  on  proposal, 

all  buildings  and  personal  property  in  the  city  be  made  in   1912  and  doesjl 
ninety  per  cent  of  the  rate  of  taxation  on  all  land  whether  improved      ^    undue 

or  not,  and  a  similar  reduction  be  made  in  each  of  the  four  follow-  jjurdens. 
ing  years  so  that  in  1917  the  rate  of  taxation  on  buildings  and  per- 
sonal property  would  be  one-half  the  rate  of  taxation  on  all  land.      ismf  \ 

J  .  one  test  of  a 

This  would  involve  only  about  the  same  increase  each  year  in  the  successfui 
tax-rate  on  land  that  has  actually  occurred  in  New  York  City,  for  municipal  ad- 
each  of  the  three  years  from  1907  to  1910,  although  this  increased   ministration. 

101 


Rate  of  taxa- 
tion of  land 
values  is 
adjustable  and 
changeable. 


Wall  Street 
naturally 
against  taxing 
land  values. 


Conservative 
organisations 
in  New  York 
City  favor 
halving  the 
tax -rate  on 
buildings. 


Heavier  taxa- 
tion of  land 
values  the  just 
method  of 
reducing  city 
debts. 


tax-rate  has  been  levied  upon  land  and  buildings  alike,  and  the 
assessed  value  of  land  has  also  been  markedly  increased  during  the 
past  three  years,  thus  making  the  total  taxes  to  be  paid  upon  land 
much  higher.  Tax-rates  in  most  progressive  American  cities  are 
increasing  now,  but  industry  is  bearing  an  undue  proportion  of  the 
cost  of  the  enlargement  of  municipal  functions  essential  to  municipal 
progress  and  development. 

It  is  apparent,  however,  that  it  is  possible  for  any  city  either 
to  stop  when  the  rate  of  taxation  on  all  buildings  and  personal  prop- 
erty is  only  one-half  the  rate  of  taxation  on  all  land,  or  to  continue 
the  reduction,  depending  upon  the  public's  control  of  legislation. 
It  is  probable  that  few  communities  would  decline  to  continue 
reducing  the  tax-rate  on  buildings  after  a  few  years  of  experience 
with  such  lower  rate.  On  the  other  hand,  every  community  in 
the  country  has  to  guard  against  the  dominance  of  the  great  monied 
interests  which  can  secure  the  reversal  of  the  policies  best  for  the 
interests  of  the  community,  but  opposed  to  their  own  special  inter- 
ests. The  justice  of  the  ''halving  of  the  tax-rate  on  buildings"  has 
been  readily  appreciated  by  a  large  proportion  of  New  York's  voters, 
although  the  proposal  has  been  before  them  for  only  about  four 
months,  but  it  has  been  discussed  with  some  fair  degree  of  thorough- 
ness in  the  metropolitan  press  and  in  the  scores  of  meetings  through- 
out the  city.  The  bill  providing  for  the  gradual  reduction  of  the 
tax-rate  on  buildings  as  explained  above  has  been  endorsed  by  such 
conservative  organizations  in  the  city  as  the  Citizens  Union,  the 
City  Club,  and  the  Federation  of  Churches  and  Christian  Organiza- 
tions, as  well  as  by  many  of  the  most  prominent  merchants,  manu- 
facturers, business  and  professional  men  of  the  city,  by  all  of  the 
largest  labor  unions  of  the  city,  by  taxpayers  associations  and 
boards  of  trade,  as  well  as  by  social  workers,  including  the  secre- 
taries of  the  three  largest  relief  organizations  in  the  city,  and  by 
savings  and  loan  associations. 

The  fiscal  policy  of  a  city  with  reference  to  meeting  its  current 
obligations  has  a  very  important  bearing  on  the  taxation  of  land 
values.  This  is  discussed  more  at  length  under  fiscal  advantages 
of  taxing  land  values,  but  should  be  referred  to  here.  The  post- 
poned payments  of  most  cities  amount  to  from  one-third  to  nearly 
one-half  of  their  current  budgets,  and  naturally  the  total  tax  levy 
would  be  increased  by  the  amount  of  such  postponed  payments  as  are 
included  in  the  sums  to  be  raised  each  year  by  taxation  and  from 
other  sources.  The  inclusion  of  even  half  of  the  postponed  payments 
of  any  city  would  materially  increase  the  tax-rate  for  a  series  of 


102 


years  until  the  termination  of  heavy  interest  and  liquidation  charges 
for  past  postponed  payments  shall  offset  such  increase.  In  New 
York  City,  for  instance,  the  "debt  service"  is  equal  now  to  about 
one-half  of  the  total  annual  postponed  payments.  The  inclusion  of 
at  least  a  part  of  such  postponed  payments  should  be  part  of  the 
effort  to  tax  land  values  so  as  to  avoid  the  egregious  mistake  of 
Vancouver  in  keeping  such  a  low  tax-rate  on  land  values  as  not 
to  secure  any  appreciable  part  of  the  economic  ground  rent.  The 
payment  by  fifty  or  even  forty  yearly  installments,  of  the  cost  of  Postponed 

paving  streets,  or  catching  up  with  a  city's  needs  for  schools,  parks  P°y*****  the 

«       t  i  1-  .  e    ostrich  method 

and  other  public  purposes  is  contrary  to  any  proper  conception  of      ,  concealin 

taxation  of  land  values.  In  a  community  where  the  land  values  municipa\ 
represent  a  large  proportion  of  the  total  assessed  value  of  the  city  expenditures. 
a  larger  portion  of  the  deferred  payments  should  be  included  in 
the  annual  budget  to  be  met  by  current  taxation,  and  at  least  one- 
half  of  the  cost  now  met  by  such  payments  should  be  included  when 
the  rate  of  taxation  on  buildings  and  personal  property  has  been 
reduced  to  one-half  or  less  of  the  rate  of  taxation  on  all  land.  The 
following  statement  by  the  president  of  one  of  the  largest  mort- 
gage companies  in  New  York  City,  regarding  the  halving  of  the 
tax-rate  on  buildings  indicates  the  advisability  of  a  gradual  reduc- 
tion of  taxation  on  buildings  from  the  point  of  view  of  conserva- 
tive business  interests,  which  admit  the  injustice  of  the  present  sys- 
tem of  taxing  land  and  buildings  at  the  same  rate: 

"Going  into  effect  gradually  through  a   period  of   five  years  there  ^  mortgage 

should  be  no  danger  of  unsettling  mortgages  or  wiping  out  equities,  ex-  company 

cept  a  possible  sentimental  effect,  while  the   added   fact  that  the   real  Presidents 

estate  market  is  quiet  and  there   is  no   active  speculation  or  building  view  °t  e$ec 

movement  would  tend  to  minimize  any  possible  inconvenience  to  owners    °*   ia  vin9     le 

r  „  tax-rate  on 

of  property.  ,    ., ,. 

buildings. 

3RD.     EXEMPTING  ALL  BUILDINGS  FROM  TAXATION. 

To  attempt  to  do  this  immediately  in  any  developed  American    The  injustice 
city  would  doubtless  precipitate  a  very  serious  panic  since  no  injus-   of  taxing 
tice  long  established  and  hence  the  basis  for  transactions  and  busi-   bmM™9s  at 
ness  can  be  changed  immediately.     That  ultimately  all  taxes  upon  fl^  ^^  ^^ 
buildings  and  personalty  will  be  abolished  in  American  cities  is  be  ended  at 
as  certain  as  that  it  is  unwise  to  attempt  such  abolition  otherwise   once. 
than  gradually.    In  a  new  city,  however,  the  case  is  different.   Cities 
like  Gary,  Indiana,  and  other  rapidly   developing  industrial   com- 
munities might  safely  start  in  without  taxing  buildings  at  all.    This 
would  not,  however,  be  the  single  tax.       On  the  other  hand,  the 

103 


writer  has  suggested  to  President  Taft  and  Congressman  George 
that  the  single  tax  should  be  tried  out  in  the  districts  known  as 
Controller  Bay. 

4TH.  EXEMPTING  FROM  TAXATION  CERTAIN  BUILDINGS  WHICH 
CONFORM  TO  A  CERTAIN  HIGH  STANDARD  OF  EXCELLENCE, — EITHER 
FOR  A  TERM  OF  YEARS  OR  PERMANENTLY. 

Exemptions  Aside  from  the  result  of  exempting  buildings  from  taxation  upon 

are  contrary  to  the  borrowing  ability  of  a  city,  exemption  even  of  "model  dwell- 
the  American  ings"  so-called,  is  contrary  to  the  American  spirit.  To  be  sure  there 
Equality  are  at  Present  so  *ew  m°del  tenements  or  other  buildings  in  large 

American  cities  that  their  exemption  would  not  seriously  affect  any 
city's  borrowing  capacity,  the  proposal  being  entirely  different  from 
the  exemption  of  $3,000  on  all  buildings  and  the  total  exemption  of 
all  buildings  assessed  for  $3,000  or  less.    Americans  are  rather  keen 
on  equality  before  the  law,  theoretically  at  least  always,  and  vig- 
orously when  any  one  is  going  to  get  a  better  chance  than  them- 
Exempting          selves.    The  exemption  of  model  dwellings  moreover  puts  a  heavier 
some  buildings   burden  upon  other  buildings,  and  tends  to  increase  rents  in  them 
puts  a  h earner     without  providing  any  appreciable  incentive  to  substitute  model  for 
thers.     unsanitary  tenements,  unless  the  exemption  is  permanent.  The  ques- 
tion of  how  long  model  buildings  stay  model  even  when  they  start 
out  so  designated  is  another  point  to  be  considered,  since  with  age 
even  buildings  with  adequate  sanitary  provisons  tend  to  deteriorate. 

Assessment  of  5TH.      ASSESSING   ALL    PUBLIC    IMPROVEMENTS    UPON    PROPERTY 

public  im-  BENEFITED. 

provements  on 

property  in  so  *ar  as  tne  property  upon  which  the  cost  of  public  improve- 

benefited  puts     ments  is  assessed  is  unimproved,  land  values  are  taxed  by  assess- 

a  heavy  ment  for  streets,  sewers,  sidewalks,  parks,  etc.    These  costs  are  often, 

lurden  on  however,  assessed  upon  buildings.    It  is  not  customary,  however,  to 

assess  schools,  and  other  public  buildings  nor  rapid  transit  upon  the 

Cost  of  assess-  property  benefited  thereby,  and  it  is  perfectly  clear  that  all  of  these 

public  improvements  benefit  property.     The  attempt  to  determine, 

°benefitd  '  precisely,  in  cities  how  much  a  street  increases  the  value  of  land 

very  great  m  t^ie  neighborhood  and  how  much  sewers,  parks,  etc.,  do  so,  has 

been  conspicuously  unsuccessful.    At  times  the  cost  of  ascertaining 

the  area  benefited  by  a  public  improvement  such  as  a  driveway,  and 

assessing  the  cost  of  the  improvement  thereon  with  mathematical 

precision,  has  been  more  than  the  cost  of  the  improvement.     The 

proposal  to  assess  transit  lines  upon  property  benefited  has  been 

hailed  as  a  solution  of  the  transit  problem,  since  in  few  instances  is 

the  effect  of  public  improvement  more  immediately  and  strikingly 

104 


illustrated  than  in  the  case  of  transit  lines  the  values  of  land  on 

such  routes  being  doubled  and  trebled  sometimes  in  a  few  years. 

The  increased  traffic  to  the  termini  of  such  routes,  however,  increases 

land  values  there,  and  each  additional  extension  to  a  line  which  has 

its  terminus  in  the  center  of  a  great  city  benefits,  not  alone  the  ter-  Determination 

ritory  through  which  the  lines  run,  but  as  well  the  blocks  within  °f  ar™  ben~ 

walking  distance  of  the  terminal.     Thus  the  Hudson  Tubes  from  ^^J^y 

New  Jersey  to  New  York  which  have  a  terminal  in  lower  Manhat-  difficult. 

tan  increased  materially  the  value  of  land  in  the  vicinity.    The  cost 

of  determining  how  much  the  increase  of  land  value  during  the  past 

decade  in  Manhattan  below  Brooklyn  Bridge  is,  however,  due  to  the 

Hudson  Tubes,  how  much  to  the  opening  of  the  bridges,  how  much   Causes  which 

to  the  completion  of  the  subway  under  the  East  River  and  how  much  create  land 

to  high  pressure  water  service,  etc.,  would  be  very  great.     Similar 

difficulties  exist  in  other  cities.    Of  course,  these  items  can  be  de- 

termined, just  as  in  oriental  countries  where  labor  is  cheap  and 

women  plentiful,  women  pick  all  the  seeds  out  of  currants  to  make 

a  delicious  smooth  paste  at  the  cost  of  about  an  hour's  labor  to  a 

teaspoonful  of  paste  while  in  countries  where  time  is  money,  they 

strain  currants. 

Land  values  can  be  taxed  by  assessing  each  separate  improve- 
ment, and  even  assessing  the  cost  of  schools  upon  the  families  in 
the  districts  served  according  to  the  number  of  children  in  the  fam- 
ily, but  it  is  a  somewhat  cumbersome  method. 

6TH.    EXCESS  CONDEMNATION  OF  LAND. 

This  subject  has  already  been  sufficiently  discussed  under  fiscal  . 

.  -  e  .  Excess  cow- 

advantages  of  taxing  land  values  so  that  only  a  passing  reference  is  ^emnation  of 

needed  to  the  fact  that  the  acquisition  by  the  city  of  more  land  than  ian^  provides 

is  needed  for  a  specific  purpose  and  its  rental  or  resale  by  the  city  only  a  partial 

to  recoup  itself  for  the  cost  of  the  land  to  be  used  by  it,  has  only  method  of 

limited  application  and  is  an  extremely  unfortunate  substitute  for  taxln9  land 
general  heavy  taxation  of  land  values,  although  of  value  in  securing 
land  cheaply. 

7TH.    TAXATION  OF  INCREMENTS  OF  LAND  VALUES. 

This  proposal  which  is  not  by  any  means  novel,  having  been  Taxation  of 

suggested  by  John  Stuart  Mill,  is  feasible,  though  difficult  admit-  increases  in 


tedlv  of  application  in  most  American  cities.    The  working  of  this        , 

'.      .       .  .  1   •       *       A  11        •      endorsed  by 

tax  in  foreign  countries  has  already  been  explained.    A  small  um-  j0jin 

form  land  increment  tax  or  even  a  moderate  progressive  tax  would 
not  permanently  secure  a  large  revenue  for  a  city,  but  it  would 
have  certain  additional  advantages,  such  as  keeping  land  cheap  as 
noted  in  the  answers  to  objections  to  this  method  of  taxing. 

105 


Taxation  Com- 
mittee of 
New  York  City 
Congestion 
Commission 
advocated 
small  land  in- 
crement tax, 
and  that  pro- 
ceeds be 
devoted  to 
building 
transit  lines. 

Professor 
Davenport 
defends  land 
increment  tax, 
but  says  the 
single  tax 
doctrine  is 
merely  a 
method  for 
appropriating 
socially  pro- 
duced values. 


Various  de- 
grees of  taxing 
increases  in 
land  values. 


The  New  York  City  Commission  on  Congestion  of  Population 
were  strongly  urged,  they  state  in  their  report,  to  recommend  an 
unearned  increment  tax,  and  the  Committee  on  Taxation  of  which 
Prof.  Frank  J.  Goodnow  was  Chairman  did  recommend  an  "annual 
increment  tax  at  a  low  rate,  say  5  per  cent,  the  proceeds  of  which 
shall  be  devoted  to  the  building  of  the  transit  lines  of  which  the  city 
is  in  so  great  need." 

Professor  H.  J.  Davenport  of  Chicago  University  recently  stated : 

"The  social  appropriation  of  the  unearned  increment  of  land  values 
must  be  worked  out  not  by  a  tax  upon  the  capitalized  worth  of  the 
rental  income  but  by  direct  process  against  the  rental  income.  Not  so 
much  in  general  purpose  and  in  general  principle  as  in  theory  and  in 
method  is  the  single  tax  program  defective. 

"But  even  so,  the  principle  is  practicable  only  as  applied  to  location 
rents.  To  burden  the "  fertility  must  work  the  progressive  exhaustion 
of  this  fertility.  Only  the  irremovable  bases  of  value  can  be  safely 
burdened — and  this  only  upon  the  condition  that  the  position  rent  be 
kept  strictly  separate  from  the  fertility  rent.  Otherwise  the  owner  will, 
by  the  'skimming'  process,  deteriorate  to  the  utmost  possible  extent, 
with  the  purpose  of  transferring  his  value  investment  into  an  untaxed 
form. 

"Rightly  understood,  the  single  tax  doctrine  is  not  a  tax  doctrine 
at  all;  it  merely  urges  the  employment  of  the  tax  machinery  and 
administration  for  the  appropriation  of  socially  produced  values." 

The  following  table  shows  the  amount  and  per  cent  of  increase 
of  assessed  land  values  for  a  year  in  a  few  American  cities  : 

INCREASE   IN   ASSESSED  LAND  VALUES  FROM    IQOQ  TO    IQIO. 

Amount.  Per  cent. 

New  York $115,402,444                                   2.9 

*Chicago 43,678,609                                  4.3 

Boston 23,189,800                                   3.5 

Springfield  (Mass.)   3,407,080  (1910  to  1911)         6.1 

Washington,  D.  C 298,084                                   0.19 

Los  Angeles  33,999,840  (1910  to  1911)       17.04 

Buffalo 1,210,505                                   0.9 

The  average  annual  yield,  however,  of  a  land  increment  tax  is 
at  best  uncertain,  depending  upon  whether  the  tax  is  a  flat  rate, 
and  whether  the  rate  is  high  or  low,  whether  it  is  a  progressive  tax 
depending  upon  the  per  cent  of  increase  of  land  values,  and  if  so 
upon  the  initial  rate,  the  rapidity  of  progression  and  whether  a  large 
per  cent  is  levied  upon  all  increase  above  a  certain  minimum,  as 
well  as  whether  the  tax  is  levied  equally  upon  increases  in  land 
values  of  improved  and  unimproved  properties.  Other  disturbing 

*  Average  annual  increase  for  the  four  years,  1907  to  1911. 

106 


and  not  determinable  factors  may  enter  into  the  computation  of 
the  yield  from  a  land  increment  tax.  If  levied  at  time  of  transfer, 
the  rate  in  foreign  countries  usually  varies  according  to  the  length 
of  time  since  the  last  transfer,  a  higher  rate  often  being  levied 
abroad  upon  land  held  in  the  same  ownership  for  a  long  term  of 
years. 

The  simplest  land  increment  tax  is  doubtless  a  uniform  tax  lev-   The  simplest 

ied,  annually  upon  all  increases  in  the  assessed  value  of  land.    This  land  ™crement 

,  -ill-       •*.•         t.  i     iax  ls  a  flat 

is,  of  course,  possible  only  in  cities  where  assessments  are  annual ;  fatg  u. 

as  they  should  be  in  all  cities,  to  ensure  proper  increased  assessments  annual  increase 
of  land,  and  adequate  decrease  due  to  depreciation  of  buildings.         in  assessed 

Deductions  should  be  made  in  arriving  at  the  increases  in  value  va  ues' 
for  all  expenditures  by  the  owner  of  land  whether  improved  or  not,  Proper  deduc- 
for  transit,  sewers,  street  paving,  sidewalks,  and  any  other  similar  tions  should 
public  improvement,  as  well  as  for  any  assessments  against  property  ma  e' 
for  such  improvement.  It  is  supremely  important  to  secure  such 
careful  separate  assessment  of  land  and  improvements  as  has  been 
secured  in  New  York  City  by  Hon.  Lawson  Purdy,  President  of 
the  Commissioners  of  Taxes  and  Assessments.  The  levying  of  a 
land  increment  tax  is  also  much  easier  where  real  estate  is  assessed 
at  its  full  value.  American  cities  could  with  fairness  secure  at  least 
5  per  cent  to  10  per  cent  of  the  annual  increase  in  assessed  land 
values  above  expenditures  enumerated  above.  The  yield  from  such 
a  tax  would  doubtless  tend  to  diminish  in  a  few  years  if  assessments 
are  full  value  and  especially  if  land  values  are  taxed  $3.00  to  $5.00 
per  $100.00  of  full  value.  For  a  few  years,  however,  such  a  tax 
could  yield  a  few  hundred  thousand  dollars  in  some  cities  having  a 
population  of  500,000  or  over,  and  several  million  dollars  in  New 
York  and  Chicago,  under  the  conditions  that  land  values  are  taxed 
heavily  and  the  Vancouver  type  of  land  speculation  and  "land 
boom"  thereby  avoided.  The  difficulties  of  imposing  a  land  incre- 
ment tax  are  admittedly  great  but  not  insuperable. 

Although  the  effects  of  the  land  increment  tax  in  Frankfort-on- 
the-Main  are  complicated  by  many  provisions  as  to  rates,  exemptions 
progression,  etc.,  it  is  interesting  to  note  that  the  yield  from  this 
tax  which  was  in  1905,  833,629  marks  and  in  1906,  1,104,997  marks, 
fell  in  1907  to  498,183,  in  1908  to  198,042,  and  in  1909  to  305,593 

marks. 

Municipal 

STH.    MUNICIPAL  OWNERSHIP  OF  LAND.  ownership  of 

land  for 
As  suggested  in  the  reference  to  the  methods  of  taxing  hind  pubnc  purposes 

values  abroad  this  is  technically  municipalization  of  land  and  not  important. 

107 


Municipal 
ownership  of 
land  to  prevent 
land  specula- 
tion a  ques- 
tionable   policy. 


The  remedy 
for  land 
monopoly 
is  taxation  of 
land  values. 


Dummy  own- 
ership in 
American 
cities. 


Social  evils  of 
land  monopoly 
for  unearned 
increment  as 
serious  as  use 
of  buildings 
for  immoral 
purposes. 


taxation  of  land  values.  Probably  no  American  city  now  owns  as 
much  land  as  it  should  have  for  public  purposes,  schools  and  other 
public  buildings,  parks  and  playgrounds,  docks  and  piers,  etc.,  but 
should  secure  adequate  land  for  such  purposes  long  in  advance  of 
actual  need  so  as  to  avoid  paying  the  speculative  increase  of  value. 
On  the  other  hand  to  acquire  enough  land  to  enable  a  city  to  prevent 
speculation  in  land  is  contrary  to  American  principles  and  a  very 
questionable  policy.  Exercise  of  the  police  power  through  stricter 
building  regulations  and  through  direct  and  immediate  taxation  of 
land  values  is  much  more  feasible  in  America,  and  probably  will  be, 
until,  at  least,  we  have  installed  better  systems  of  accounting  and 
administering  the  business  of  cities.  Even  when  cities  are  efficiently 
run,  both  as  to  scope  and  administration  of  activities,  however,  and 
when  special  interests,  such  as  transit,  gas  and  real  estate  companies 
have  ceased  to  exert  their  present  dominant  influence  over  city  ad- 
ministrations, municipalization  of  land  will  be  objectionable,  because 
striking  at  the  basic  principles  of  private  initiative  and  effort.  The 
remedy  for  land  monopoly  is  not  government  ownership,  but  suf- 
ficiently heavy  taxation  of  land  values. 

INSTANCES  OF  CONCENTRATION  OF  LAND  VALUES  IN  AMERICAN  CITIES. 

Unfortunately  the  device  of  holding  property  in  the  names  of 
dummies  makes  it  extremely  difficult  to  learn  the  large  owners  of 
vacant  or  improved  land  in  American  cities,  and  the  extent  and 
value  of  their  holdings.  The  desire  of  some  few  people  to  conceal 
the  fact  that  they  own  property  because  of  its  condition  or  the  use 
to  which  it  is  put  is  sufficient  explanation  of  such  concealment  of 
ownership.  The  social  evils  resulting,  however,  from  land  monopoly 
to  secure  unearned  gain  in  American  cities  are  well  nigh  as  serious 
as  those  resulting  from  the  most  immoral  uses  of  improved  property. 
While  large  acreage  holdings  in  the  outlying  sections  of  a  city  are 
not  so  valuable  as  a  single  plot  in  a  built-up  section,  the  first  repre- 
sents prospective  unearned  value,  the  second  actual  unearned  value, 
in  private  possession.  It  is  frequently  asserted  that  there  is  no 
land  monopoly  in  American  cities,  but  the  following  figures  prove 
the  existence  of  monopoly  either  of  land  values  or  land  acreage  or 
both  in  several  American  cities.  This  data  has  been  secured  from 
various  reliable  sources,  chiefly  city  records. 


NEW  YORK  CITY. 
Concentration 

of  land  values          Eight  families,  estates  and  corporations  recently  owned  about 
in  Manhattan,     one-nineteenth  of  the  assessed  land  value  of  Manhattan,  i.  e.,  one- 


108 


nineteenth  of  $2,707,862,301.  The  total  population  of  Manhattan  is 
now  nearly  2,500,000. 

Twenty-three  families,  estates  and  corporations  owned  about 
one-ninth  of  the  total  area  of  the  Bronx,  i.  e.f  of  26,017  acres. 

In  1910,  fifty-seven  families,  estates    and    corporations    owned  Concentration 

about  one-sixth  of  the  land  in  Richmond,  about  6,000  out  of  36,600  °f  acrea9* 

holdings  in  the 
acres.  agricultural 

One  real  estate  corporation  with  stockholders  all  over  the  coun-  borough  of 
try  advertises  that  it  owns  or  controls  20,000  lots  in  Brooklyn  on  Richmond. 
future  subways  and  on  five-cent  fares,  ten  times  the  amount  in  the 
control  of  any  other  corporation  or  individual  in  that  borough,  and 
that  the  assessed  value  is  $15,000,000. 

Several  companies  and  individuals  own  50  to  500  acres  each  in 
Queens,  and  one  company  recently  owned  nearly  1,000  acres  here. 

CHICAGO. 

In  1907,  the  full  assessed  value  of  the  sites  of  the  following  nine 
well  known  buildings  in  Chicago,  The  Marshall  Field  Retail  Dep't 
Store,  The  Fair,  Palmer  House,  Siegel,  Cooper  &  Co.  Dep't  Store, 
Auditorium  Hotel,  Congress  Hotel,  Republican  Office  Building, 
Champlain  Office  Building,  Stratford  Hotel,  was  $29,182,370,  out 
of  a  total  full  assessed  land  value  for  the  city  of  ^3/139,056,69^  r/j,  j/ 
or  nearly  one  one .  hundredth.  *#c<A3^.^q/tc£: 

Messrs.  Raymond  Robbins,  a  member  of  the  Chicago  Board  of 
Education,  Philip  Angelen  and  John  C.  Harding,  former  members 
of  the  board,  made  the  following  statement  in  1909 : 

"In  1818  the  United  States  Government  gave  the  square  mile 
between  State,  Madison,  Halsted  and  Twelfth  Streets  to  the  state  of 
Illinois,  to  be  held  in  trust  for  the  support  of  the  public  schools  and 
the  education  of  the  children  of  Chicago. 

"Except  for  one  block,  between  Madison,  Dearborn,  State  and 
Monroe  Streets,  nearly  all  of  this  square  mile  was  sold  about  seventy 
years  ago  for  less  than  $40,000. 

"Within  fifteen  years  after  it  was  sold  this  square  mile  was  worth 
six  million  dollars. 

"To-day   its   value    is    hundreds    of    millions    of   dollars    (without 

improvements). 

How  land 

"The  rent  from  this  square  mile  of  land  would  be  sufficient  to  monopoly 
support  for  all  time  the  entire  school  system  of  the  state  of  Illinois  increases 
without  an  additional  dollar  of  taxation."  taxes. 

109 


Concentration 
of  land  values 
in  Boston. 


Washington 
belongs  not  to 
the  nation, 
but  to  a  few 
families 
there. 


BOSTON. 
Mr.  C.  B.  Fillebrown  gives  the  following  statistics  for  Boston : 

"The  assessed  value  of  land  in  Boston  in  1907  was  $652,995,300, 
while  the  land  at  the  southwest  corner  of  Winter  and  Washington 
Streets  was  assessed  at  $537,600,  or  one-twelve-hundredth  of  the  total 
value  of  land  in  Boston. 

"The  total  valuation  of  the  land  on  both  sides  of  Winter  Street, 
including  the  lands  on  the  Tremont  and  Washington  Street  corners, 
was  $5.142,600  in  1898,  and  this  has  increased  to  $8,272,000  in  1907. 

"This  represented  an  increase  of  58  per  cent  in  yalue  in  the  nine  years 
that  this  privileged  area  represented  approximately  one-eight-hundredth 
of  the  total  assesed  land  value  of  the  Hub." 

The  net  funded  debt,  city  and  county,  of  Boston,  January  31  st,  1909, 
was  $72,036,984.50. 

WASHINGTON. 

SOME  LARGE    HOLDINGS   OF  LAND   IN   THE  DISTRICT  OF   COLUMBIA. 

July,  1910. 

Acreage. 

A    224.88 

B   145-00 

C 341-63 

D    476.33 

E    342.69 

F    152.00 

G    148.00 


Total    1,830.53 

About  7  per  cent  of  all  the  land  exclusive  of  parks,  governmental 
reservations,  streets  and  exempt  land,  is  owned  by  seven  families, 
companies  and  estates.  Over  10  per  cent  of  the  44,800  acres  in  the 
National  Capital  is  owned  by  seventeen  companies,  families  and 
estates. 

The  assessed  land  value  of  the  site  of  the  New  Willard  Hotel 
was  in  1908,  $472,144  out  of  a  total  assessed  land  valuation  for 
Washington  City  of  $114,673,401,  i.  e.,  the  site  of  this  one  building 
was  worth  about  one  two-hundred  and  forty-third  of  the  site  of 
the  National  Capital. 


BUFFALO. 

The  total  value  of  land  in  Buffalo,  (assessed  at  about  100  per  cent 
of  its  real  value)   was  in   1910,  $168,130,110;  of  improvements, 


no 


$160,592,425  (excluding  exempt  property),  total,  $328,722,535  exclu-  Site  of  one 
sive  of  franchises.  block  in 

The  assessed  land  value  of  the  site  of  the  great  Ellicot  Square  Buffalo>  ™orth 
s-^rr-       T-.    •<  1-  •  111  rtvo  1        •        i  one  two-hun- 

Office  Building,  covering  a  block,  was  $845,200,  that  is,  about  one-  dred    ,  cif  ,s 

two-hundredth  of  the  total  assessed  land  value.  ian(j  values. 

CONCLUSION. 

The  most  immediate,  practical,  economic,  and  just,  method  of 
taxing  land  values  in  American  cities — in  which  land  and  improve- 
ments are  separately  assessed — is  a  heavier  rate  of  taxation  on  land 
values  through  a  lower  rate  of  taxation  on  all  buildings  and 
personalty. 

Halving  the  tax-rate  on  buildings  and  personalty  within  the  next  How  to  secure 
few  years  is  the  next  step  towards  securing  freedom  from  existing  freedom  from 
land  slavery.    The  total  exemption  of  buildings  and  personalty  from  e^^inff  land 
taxation  will  properly  and  naturally  follow  gradually.     The  land 
increment  tax,  despite  its  great  administrative  difficulties,  is  a  prac- 
tical and  universal  method  of  recovering  for  the  community  its  fair 
share  of  the  community  created  and  earned  land  values.    The  other 
methods  enumerated  are  limited  in  their  application,  or  cumbersome  Heavier  direct 
at  best,  and  do  not  conform  to  the  American  standard  and  ideal  taxation  of 
of  equality  and  justice,  although  temporarily  feasible.    Heavier  di-  land  values 

rect  taxation  of  land  values  and  a  land  increment  tax  will  furnish  and  a  land 

j  f  ,.          .  .  1  .      ,«  «•     .•        increment  tax 

adequate  revenues  for  every  American  city  and  be  the  most  effective  ^^    ^ 

step  that  cities,  as  governmental  entities,  can  take,  to  exterminate  adequate 
poverty  and  to  regain  their  cities  for  the  people.  revenue. 


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112 


INDEX 

PAGE 

ALLIED  REAL  ESTATE  INTERESTS  of  New  York 38 

Adequacy  of  taxation  of  land  values  for  municipal  revenues 61-66 

Agriculture,  intensive  in  cities 7°~7I 

Australian  Commonwealth,  proposed  land  tax  in 94-95 

Australasian  Provinces,  taxation  of  land  in 95 

Assessment  of  land  and  buildings  separately 99 

Assessing  all  public  improvements  upon  property  benefited . .  104 

BERLIN,  sources  of  municipal  revenue  in 86 

Budapest,  sources  of  municipal  revenue  in 85 

Business  interests,  governmental  control  over 53 

Business  men's  endorsement  of  halving  the  tax-rate  on   buildings   in 

New   York    51 

Brunhuber,    Carl    47-49 

Buildings,  incidence  of  taxes  on 18,  25,  27,  30,  57,  58 

Buildings,  result  of  taxing  at  the  same  rate  as  land 12,  18,  27,  30,  32,  54 

Boston   21,  22,  62-63,  1 10 

Buffalo    64,  iio-in 

"CORNERS"  in  Land   12 

"Confiscation"  involved  in  heavy  taxation  of   land  values 15,  20,  40 

Constitutionality  of  heavier  tax-rate  on  land  than  on  buildings 42-44 

Congestion,  and  taxation  of  land  values 2,  12,  18,  58 

Chicago    4,  22,  64,  109 

City  Planning  69 

Consumption  and  taxation  of  land  values 81-83 

Campbell-Bannerman,  Sir  Henry   13 

Concentration  of  land  values  in  American  cities 108-111 

DEVINE,  Dr.  E.  T 9,  10 

Dangers  of  too  low  tax-rate  on  land 36,  37 

Durack,  Walter  L 38 

Decentralization  of  industry  and  taxation  of  land  values 42 

Dickey,  Mr.  Luther  S 33 

ECONOMIC  laws  and  taxation  of  land  values 55 

Excess  Condemnation  of  Land 67,  105 

England,  Land  Increment  Tax  in 93-94 

Exemption  of  buildings  from  taxation 103-104 

FEDERATION  OF  CHURCHES  on  moral  aspects  of  taxing  land  values 24 

Fire  protection  and  taxation  of  land  values 30-32 

Fillebrown,  C.   B 17,  60,  62 

Franchises,  Taxation  of 58 

Fairlie,  Prof.  John  H 90,  93 


PAGE 

GERMAN  Land  Increment  Tax 90-93 

Goodnow,  Prof.  Frank  J 86,  106 

George,    Henry    17 

HOME  ownership  and  taxation  of  land  values 6,  8,  9,  35,  80 

Housing,  English  Royal  Commission  on   13 

Housing  Reformers  and  Taxation  of  land  values I 

Housing  standard   for  American  workmen 6 

Hennessy,  Charles   O'C 38-39 

Habitations,  graduated  tax  on  58 

Hart,  Dr.  Albert  Bushnell    94 

Halving  the  tax-rate  on  buildings  i,  51,  101-103 

INDUSTRY,  result  of  taxes  on 42 

JOINT  interest  of  wage-earners  and  employers  in  taxing  land  values...        32 
KANSAS   CITY    65-66 

LAND  values,  causes  of   15,  17,  21,  24,  46 

Land  speculation  and  how  to  prevent  it 6,  10,  13,  47-48 

London,  sources  of  Municipal  Revenue  in 88-90 

Landowners'   Risks    16 

Land  Increment  Tax 48,  90-94,  105 

Landowners'  Profits  16,  20-23 

Land  Monopoly  in  American  cities 108-1 1 1 

Lloyd-George 21,  93 

Land    values,    taxation    of,    no    substitute    for    restrictive    and    safety 

regulations    31,  4,  23-24 

Landowners'   "rights"  to   improvements  at  public  expense 47 

Land  values,  incidence  of  taxation  on 6,  7,  8,  24,  30,  34,  48,  56 

Lower  assessment  of  buildings  than  of  land 100-101 

Lower  tax-rate  on  buildings  than  on  land 101-103 

MANUFACTURERS,  regulation  of 12,  53 

Mill,   John   Stuart    25,  50 

Municipal    social   activities    25 

Moody,  John,  on  halving  the  tax-rate  on  buildings 39~40 

Municipal  debts  and  taxation  of  land  values 36,  54,  68 

Money  market  and  taxation  of  land  values 54 

Mewes,  Dr.  Wilhelm,  on  land  speculation 10 

Municipal  landownership    96-97,  107 

NATIONAL  HOUSING  ASSOCIATION    i 

Nettlefold,  Councillor  John  S n 

New  York  City 2,  18,  19,  22,  24,  28,  51-52,  61,  66,  108-109 

OMAHA,  Nebraska   64 

PARIS,  Sources  of  Municipal  Revenue  in 87 

Panics,  and  taxation  of  land  values 33~39 

Private  Property  and  Taxation  of  land  values 17 

Pleydell,  A.  C 46,  49 

Poverty    76,  77,  79,  80 

Pittsburgh    22,  78,  80 


PAGE 

ROBINSON,  ALLAN 19 

Rents  and  taxation  of  land  values  7,  8,  10,  12,  27 

Room-overcrowding  and  taxation  of  land  values 13 

Referendum,  need  of  popular  on  taxation  of  land  values 23 

Ricardo    59 

Rogers,  Thorold  60 

SELIGMAN,  Prof.  E.  R.  A. 

On  the  single  tax 44 

On  the  land  increment  tax  and  lower  tax- rate  on  buildings 45 

On  the  incidence  of  taxation  18,  60 

Savings    and    Loan    Associations'  Officers    endorse    half    tax-rate    on 

buildings 37,  38 

Sage  Foundation  Homes  Co 73-75 

Salisbury,  Marquis  of  95 

Standard  of  living  and  taxation  of  land  values 26,  28,  29 

Socialistic  alternative  for  taxing  land  values 54-55 

Springfield,   Mass 65 

Skyscrapers,  graduated  tax  on   59 

Smith,    Adam    57,  59 

Sulzberger,  Cyrus  L 41 

Social  unrest   75 

Scottish  Select  Committee  on   Taxation  of  Land  Values 96 

TENEMENT  HOUSE,  Prevention  vs.  Reform  of 24 

Transit  vs.  taxation  of  land  values 40-42 

Tenement  house  restrictive  legislation,  results  of 3 

Tenancy  in  American  cities  27 

Taylor,  Mayor  L.  D 33-37 

UNSANITARY  Tenements  and    taxation  of     land   values 45 

"Unearned  increments"  from  other  sources  than  land  values 44 

VANCOUVER,  Single  Tax  in 33-37 

Veiller,  Lawrence   2-3 

Vienna,  Sources   of  Municipal  Revenue  in 85 

WAGES  and  taxation  of  land  values 26,  30,  82 

Wall  Street  and  taxation  of  land  values 39,  60 

Washington,  D.  C 4,  65 

Worcester,  Mass 65 


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